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THE  MONEY  PROBLEM. 


inquiries  Concerning 


THE 


NATURE  AND  OFFICE  OF  MONEY, 


AND  THE 


SOURCE  OF  ITS  VALUE: 


REMARKS  ON  INFLATION, 


AND 

life 


IS  HENRY  ISliONSON,  M.  D 

. v- 


COMMERCIAL  lunacy, 

Til/  DOWNFALL  OF  PRICER. 


PREFACE. 


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At  the  time  the  legal  tender  act  was  taken  up  for  discussion,  in  January, 
1862,  the  people  generally  took  but  little  interest  in  it,  and  comparatively 
few,  as  I apprehend,  understood  its  fearful  significance.  It  is  charitable  to 
suppose  that  Congress  itself  (or  a majority  of  it)  was  not  fully  aware  of 
what  it  was  about  to  do.  History  had  been  forgotten ; the  costly  and  bit- 
ter experiences  of  the  Revolution  were  set  aside ; the  remonstrances  of  a 
few  earnest  men  were  unavailing,  and  an  experiment  repeated  which  a 
hundred  times  had  failed  with  disaster.  When  the  law  had  begun  to  work 
out  the  expected  results,  I undertook  to  write  the  early  history  of  paper 
money  in  Connecticut,  hoping  in  that  way  to  do  my  part  in  setting  forth 
the  perils  of  the  course  pursued  by  the  government.  The  work,  entitled 
“ A Historical  Account  of  Connecticut  Currency,  Continental  Money,  and 
the  Finances  of  the  Revolution,”  192  pp.,  appeared  just  at  the  close  of  the 
war.  It  made  a part  of  the  first  volume  of  the  New  Haven  Colony  Histori- 
cal Society. 

Twelve  years  later,  after  the  law  had  wrought  out  the  mischief  it  was  fitted 
to  produce,  and  the  speculating  phrensy  had  run  through  its  customary 
^ stages,  culminating  in  the  panic  of  September,  1873, 1 prepared  and  printed 
fo  for  private  circulation  a small  pamphlet,  in  which  I attempted  a brief  ex- 
position of  the  nature  and  office  of  money,  and  the  laws  which  govern  it. 

* It  bore  the  title  of  “ The  Money  Problem.”  A few  friends  appeared  to 
€ 

J think  so  well  of  it  that  I have  undertaken  to  write  a second  essay  on  the 
^same  general  subject,  in  the  latter  treating  of  topics  not  mentioned  or  barely 
^ alluded  to  in  the  other.  Each  was  intended  to  be  an  independent  article, 
7 more  or  less  complete  in  itself,  which  fact  may  account  for  occasional  re- 
0 petitions.  Both  will  be  found  in  the  pages  which  follow ; but  in  some  cases 
P the  last  essay — “ The  Money  Problem  Again  ” — will  be  put  in  covers  of  its 
own.  If  I have  failed  in  any  or  in  all,  I have  done  no  more  than  many 
' others  who  have  written  at  more  length,  and  spoiled  paper  in  larger  amount. 

New  Haven,  CoNN.,Apn7,  1877. 


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Digitized  by  the  Internet  Archive 
in  2017  with  funding  from 

University  of  Illinois  Urbana-Champaign  Alternates 


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:tps://archive.org/details/moneyproblemessaOObron 


THE  MONEY  PROBLEM. 


Money  is  to  most  of  us  a familiar  object,  a necessity  of  our 
daily  life.  It  is  used  as  an  instrument  or  medium  of  exchange 
by  which  the  wants  of  trade,  perennial  as  our  industry,  are  sup- 
plied. The  representative  of  all  material  good,  it  becomes  known 
to  us  before  we  begin  to  reason,  and  in  after  years  the  facts 
which  are  so  old  seem,  as  with  all  our  early  acquisitions,  to  need 
little  explanation,  and  none  which  appearances  do  not  suggest. 
Time-worn  and  seemingly  simple,  they  excite  in  most  men  no 
curiosity  and  no  serious  inquiry.  Like  the  phenomena  of  our 
own  minds,  their  nearness  and  perpetual  presence  too  often  breed 
indifference,  and  turn  aside  philosophical  investigation.  In  this 
manner,  indistinct  and  erroneous  views  come  to  be  entertained. 
Another  thing  should  be  noted.  Our  business  men  who  have 
most  to  do  with  money  have  little  time  for  study,  none  for  ab- 
stract thought.  They  are  not  trained  to  it,  and  can  see  no  profit 
in  it.  In  the  evening  of  life,  when  riches  and  some  leisure  have 
been  secured,  new  tastes  and  habits  cannot  well  be  acquired; 
faculties  long  unexercised  cannot  be  awakened,  or  will  not  work 
effectively.  There  is,  as  I am  aware,  one  splendid  exception  to 
these  remarks.  David  Ricardo,  the  profoundest  of  all  the  wri- 
ters on  Political  Economy,  was  long  and  extensively  engaged  in 
the  business  of  the  London  stock  exchange,  and  thereby  acquired 
a large  fortune.  But  Ricardos  are  not  a common  growth,  and 
cannot  be  extemporized.  Usually,  men  in  trade,  whatever  their 
natural  gifts,  are  fully  occupied  in  the  management  and  super- 
vision of  their  affairs;  cannot  devote  themselves  to  science,  and 
would  not  succeed  if  they  did.  Notwithstanding  this  manifest 
unfitness,  caused  by  occupation,  the  banker  or  capitalist  who  has 
spent  his  best  years  among  money-bags  and  greenbacks  thinks 
himself  specially  qualified  by  his  experiences  to  dogmatize  con- 
cerning the  nature  of  money,  and  the  laws  which  govern  it. 
Nor  does  the  unthinking  world  question  his  authority  to  teach. 
If  the  secretary  of  the  U.  S.  treasury  be  in  doubt  regarding  a 
proposed  measure  or  policy,  he  takes  the  “ fast  train  ” to  consult 


2 


the  magnates  of  Wall  street.  He  does  well  to  get  the  impres- 
sions of  experienced  financiers.  They  have  much  knowledge  of 
details  which  mere  politicians  and  scholars  have  not,  and  are  fa- 
miliar with  the  practical  working  of  the  commercial  machinery. 
Some  of  them  too  are  men  of  enlarged  and  cultivated  under- 
standings. To  say  the  least,  it  requires  as  much  intellect  to  or- 
ganize and  superintend,  with  the  best  results,  an  extensive  trade 
or  industry,  as  it  does  to  be  a reputable  professor,  a senator  in 
Congress,  or  a college  president.  At  the  same  time,  it  must  be 
admitted  that  no  uninspired  man,  whatever  his  ability,  can  under- 
stand, much  more,  safely  teach,  that  which  he  has  not  studied. 
Neither  scholarship,  professional  eminence,  or  observation  be- 
hind the  counter  gives  the  requisite  qualifications.  One  may  be 
a skillful  helmsman  or  navigator  and  be  ignorant  of  astronomy, 
and  vice  versa.  An  astute  lawyer,  learned  judge  or  useful  legis- 
lator may  know  little  of  monetary  science.  Too  conspicuous 
illustrations  may  be  found  in  the  speeches  of  bewildered  con- 
gressmen and  the  decisions  of  benighted  courts.  True  wisdom 
imposes  silence,  or  at  least  modesty,  at  the  point  where  knowl- 
edge ceases. 

The  confusion  and  diversity  of  opinion  which  find  a lodge- 
ment in  the  common  mind  concerning  money,  have,  for  the  most 
part,  come  from  false  and  incompetent  teaching.  Mischief  has 
been  done  by  book-worm  expounders  and  abstract  thinkers,  but 
far  more  by  persons  called  practical  or  business  men.  So  long 
as  the  multitude  (the  “talking”  multitude)  of  the  latter  class, 
without  reference  to  natural  or  acquired  fitness,  continue  to  be 
the  trusted  instructors  of. the  popular  mind,  writing  on  its  blank 
pages  whatsoever  they  will,  so  long  shall  we  have  among  the 
people  crudity  of  thought,  contradiction  and  misguided  perni- 
cious effort,  all  of  which  will  find  a resting-place  in  legislation. 

Though  on  questions  of  currency,  the  facts  which  first  meet 
the  eye  lie  on  the  surface,  there  are  others  more  recondite,  more 
fundamental,  which  reveal  themselves  to  the  reflective  faculties 
alone.  These  key-stone  facts,  to  be  understood,  must  be  studied 
with  the  advantage  of  all  the  lights  which  the  best  thinkers  have 
supplied.  A new  explorer  in  any  field  of  science  first  endeavors 
to  learn  what  has  been  done  by  other  inquirers.  It  is  folly  (or 
worse)  for  any  finite  man,  however  learned  and  able,  to  neg- 
lect external  helps,  and  attempt  to  excogitate  from  his  own  brain, 
untrained  in  that  kind  of  work,  a true  theory  of  money.  Yet, 


3 


this  is  done  exultingly  by  those  who  have  never  learned  the  ele- 
ments of  Political  Economy;  who  have  not  read  a page  under- 
standingly  of  Adam  Smith,  Malthus,  Ricardo,  Say  or  J.  S.  Mill. 
It  is  not  possible  that  anything  but  chaff  should  come  from  the 
intellectual  throes  of  these  persons. 

To  the  thoughtful,  Political  Economy,  to  which  the  money 
problem  belongs,  is  an  attractive  science.  Its  fundamental 
principles  are  more  durable  than  the  hills,  and  its  reasonings  and 
conclusions  almost  as  exact  as  the  demonstrations  of  mathema- 
tics. Step  by  step,  under  the  guidance  of  a few  master-minds,  it 
has  grown  up  within  a century.  A multitude  of  heterogeneous, 
apparently  discordant  facts  have  been  reduced  to  order,  classi- 
fied and  traced  to  their  sufficient  causes.  All  this  has  been  done 
by  trained  workers — those  who  have  been  content  to  begin  at  the 
beginning,  to  forget  their  prejudices  and  conceits,  to  crucify  their 
love  of  origiilality  and  invention,  and  to  become  patient,  earnest 
laborers  in  a neglected  field  of  inquiry.  Accepting  all  that  has 
been  done  by  others,  starting  from  the  vantage  ground  the  fore- 
most have  reached,  they  press  forward  cautiously,  perhaps  pain- 
fully, but  surely,  each  adding  something  to  the  growing  mass  of 
knowledge.  In  our  era,  this  is  the  course  followed  in  all  the 
sciences.  He  who  pursues  it  may  hope  at  least  to  comprehend 
what  others  have  done.  Raw  recruits  and  three  days’  volunteers 
never  reach  this  point. 

The  questions  relating  to  money  have  been  so  long  to  a large 
extent  in  unskillful  hands,  and  are  so  overlaid  with  error  and  rub- 
bish, that  it  will  be  necessary  to  go  back  for  a moment  to  first 
principles,  and  in  the  light  of  these,  to  examine  the  speculations 
and  assumptions  which  have  been  put  forth  so  confidently,  and 
which  at  this  moment  are  vexing  and  perplexing  the  nation. 
To  be  obliged  to  do  this  is  not  a little  discouraging,  but  to  him 
who  would  make  himself  understood  there  is  no  alternative. 
Preaching  on  this  subject  can  have  no  effect  till  there  be  some- 
thing like  agreement  as  to  those  primary  truths  which  underlie 
all  our  reasonings,  and  to  which  the  last  appeal  must  be  made 
in  cases  of  doubt.  Having  placed  before  the  mind  these  simple, 
fundamental  truths,  and  obtained  for  them  that  acceptance 
which  is  inevitable,  it  will  be  easy  to  go  forward  and  correct 
mistakes — easy  to  overturn  the  card-houses  which  dreamers  and 
our  ten  thousand  teachers  have  erected.  Standing  in  the  light 
of  these,  it  will  be  possible  to  bring  forth  order  out  of  confusion, 


4 


perhaps  noon-day  out  of  midnight.  I do  not  mean  that  there 
will  be  no  dark  corners  left,  but  the  field  of  distinct  vision  will 
be  greatly  enlarged. 

In  setting  forth  the  laws  of  monetary  science,  it  may  not  al- 
ways be  convenient  to  ennumerate  all  the  transient  influences^ 
which  may  slightly  effect  results.  My  object  in  writing  the  fol- 
lowing pages  is  to  show  the  tendencies  of  recognized  and  con- 
trolling principles,  sometimes  overlooking  momentarily  disturb- 
ing elements. 


Among  rude  peoples  and  in  the  early  stages  of  society,  com- 
modities exchange  one  for  another  without  the  intervention  of 
money.  A spear,  say,  is  given  for  an  oar,  two  beaver-skins  for 
a salmon,  or  a wigwam  for  a canoe.  This  is  barter.  In  each 
case,  the  producer  or  proprietor  parts  with  his  labor,  and  expects 
to  get  as  much  in  return,  or  in  other  words  an  equivalent.  If 
gold  be  discovered,  and  become  desirable  for  use  or  ornament, 
the  owner  must  be  paid  current  wages  for  the  time  spent  in  ob- 
taining it.  On  no  other  condition  will  he  bring  it  to  market. 
In  his  just  view,  his  labor  is  as  valuable  as  that  of  the  oar-maker 
or  trapper,  and  should  be  as  well  rewarded.  If  others  think  dif- 
ferently, he  will  give  up  gold-digging,  and  follow  some  other 
occupation.  As  is  the  fact  with  all  products,  gold  may  be  re- 
garded as  embodied  and  condensed  labor  having  a fixed  relation 
to  other  articles.  If  on  the  average,  one  day’s  toil  be  required 
to  secure  23.2  grains  of  fine  gold,  this  quantity  will  exchange 
for  a day’s  toil  in  every  other  occupation,  oar-making,  beaver- 
catching,  &c.  Of  course  allowances  must  be  made  for  excep- 
tional skill  and  risks — All  this  is  obvious. 

In  process  of  time,  on  account  of  its  many  advantages — its 
scarcity,  portability,  divisibility,  imperishableness,  &c.,  gold 
was  employed  as  a common  measure  of  value,  as  the  yard  stick 
was  of  length  and  the  pound  of  weight.  If  a man  had  some- 
thing to  sell,  he  exchanged  it  first  for  gold,  and  then  with  that 
bought  whatever  he  desired,  taking  care  in  each  case  to  get  as 
much  as  he  gave.  The  great  convenience  of  the  practice — the 
having  a commodity  which  in  the  market  would  be  accepted  by 
all,  and  the  consequent  saving  of  time  and  trouble — secured  its 
general  adoption.  From  the  moment  the  glittering  bauble  was 
sought  and  held,  not  for  its  ordinary  uses,  but  as  a medium  of 
exchange,  it  became  money.  At  this  point  government  came 


upon  the  stage,  for  the  moment  beneficently.  To  save  the  cost 
of  weighing,  proving,  &c.,  and  to  meet  more  perfectly  the  wants 
of  traders,  small  and  great,  it  invited  the  producers  and  holders 
of  gold  to  bring  it  to  the  mint  and  have  it  coined.  It  was  divid- 
ed  into  suitable  pieces  of  determinate  weight  and  fineness, 
stamped,  named,  made  a legal  tender,  and  returned  to  the  de- 
positor as  coined  money.  The  unit-piece  of  our  currency,  by  a 
law  of  Congress  passed  in  1834,  contains  23.2  grs.  of  pure  gold, 
and  is  called  a dollar.  The  government  stamp  is  only  a certifi- 
cate and  pledge  of  weight  and  fineness,  while  the  legal-tender 
provision  compels  creditors  to  receive  it  for  what  it  claims  to  be. 
It  neither  adds  to  or  takes  from  its  intrinsic  worth.  It  is  still 
the  product  of,  say,  a day’s  work  packed  in  a convenient  form;  is 
the  necessary  equivalent  of  a day’s  work  in  the  market,  and 
will  everywhere  be  received  in  payment  for  oars,  spears,  shoes, 
hats,  coats,  &c.  Five  thousand  dollars  will  buy  a house  because 
the  sum  named  and  the  house  represent  and  contain  each  the 
labor  of  fifty  men  for  one  hundred  days.  They  are  commer- 
cial equivalents.  No  matter  how  complex  the  product,  the 
aggregate  of  all  the  items  entering  into  it  will  show  its  natural 
value  in  exchange.  The  fixed  relation  of  one  thing  to  another, 
which  relative  value  establishes,  cannot  be  changed  by  legisla- 
tion. The  law-makers  may  alter  the  forms,  names  and  weights 
of  the  coins — may  call  a dime  a dollar,  or  make  one  dollar  into 
two  or  five — but  they  cannot  cause  23.2  grains  of  fine  gold  to  be 
given  for  more  or  less  than  the  labor  it  contains.*  Herein  is  one 
advantage  of  a metallic  currency.  In  an  important  sense,  it  has 
a stable  value  determined  by  its  weight,  and  not  at  all  by  the 
names  it  may  bear.  Once  in  possession,  the  holder  may  go  to 
sleep  with  the  assurance  that  it  will  not  turn  to  ashes. 

But  the  administrators  of  governments  are  needy,  often  crafty 
and  depraved.  They  spend  more  than  their  income,  and  to  eke 
out  a living,  sometimes  resort  to  plunder  and  deceit.  To  benefit 
themselves,  their  retainers  and  supporters,  they  abuse  the  sover- 
eign power,  and  debase  the  coinage.  Though  they  cannot  alter 
the  intrinsic  and  exchangeable  value  of  23.2  of  gold,  they  can 

* In  all  the  products  of  industry,  where  society  is  at  all  advanced,  the  profit  which  is 
obtained  for  the  use  of  capital  is  one  of  the  elements  of  value.  But  profit  usualty  bears 
but  a small  proportion  to  the  other  element,  and  may,  without  disturbing  the  reasonings, 
be  ommitted.  Accordingly,  for  the  sake  of  simplicity,  it  is  left  out  of  the  account  in 
this  essay.  For  the  same  reason,  no  reference  is  made  to  the  effects  of  monopoly  on  ex- 
changeable value. 


6 


put  fewer  grains  into  the  coins.  Having  provided  that  “ dollars  ” 
shall  be  legal-tender,  they  can,  without  changing  the  name,  make 
four  out  of  three  or  two,  thereby  reducing  their  indebtedness 
one-quarter  or  one-half,  and  robbing  their  creditors  to  an  equal 
amount.  (A  pound  of  silver  was  originally  coined  into  twenty 
English  shillings;  it  is  now  coined  into  sixty-six  shillings.) 
In  this  way,  by  a system  of  false  naming,  industry  is  deprived 
of  its  reward  on  an  enormous  scale.  As  the  cheapest  and  poorest 
lawful  or  accepted  currency  is  always  used  for  paying  debts, 
debtors  with  gleeful  hearts  take  advantage  of  the  change.  Every 
man  who  lent  dollars  containing  each  23.2  grs.  of  gold,  and  cost- 
ing, say,  a day’s  toil  and  sweat,  is  repaid  in  dollars  of  three- 
fourths  or  half  the  weight.  Every  laborer  who  bound  himself 
in  law  to  work  one  hundred  days  for  one  hundred  dollars,  and 
did  as  he  agreed,  receives  payment  for  only  seventy-five  or  fifty 
days.  If  a husbandman  sold  his  corn,  his  cow  or  his  farm,  the 
merchant  his  merchandise,  or  the  manufacturer  his  goods,  made 
or  to  be  made,  and  were  not  paid  till  the  new  dollar  appeared, 
he  is  swindled  out  of  a large  proportion  of  his  own.  But  this  de- 
basement of  the  coin  would  only  affect  those  who  stood  in  the 
relation  of  debtors  and  creditors.  Its  retroactive  operation 
would  be  oppressive,  but  future  contracts  would  not  be  embar- 
rassed. He  who  had  property  of  any  kind  to  sell  would  ask  and 
obtain  for  it  as  much  gold  as  before.  The  practice  however  of 
making  light  coins  is  so  plainly  and  contemptibly  dishonest,  that 
reputable  governments  are  not  now  guilty  of  it.  The  more  cer- 
tainly to  prevent  it  in  future,  they  should  be  compelled,  when 
possible,  to  stamp  on  each  piece  its  weight  and  fineness,  and  to 
apply  the  name  to  none  of  a different  standard. 

Hitherto,  very  briefly,  I have  dealt  only  with  foundation-prin- 
ciples, and  the  simplest  elements  of  monetary  science.  They 
will  not  be  disputed;  but  there  are  other  truths  somewhat  more 
complex,  logical  inferences  from  them,  and  equally  undeniable, 
which  must  be  considered.  That  the  derivative  truths  may 
be  understood,  the  primary  facts  must  be  borne  in  memory,  and 
at  every  step  applied. 

Coin,  which  is  itself  given  for  the  commodities  it  measures, 
does  not  indicate  values  with  quite  as  much  certainty  as  the 
yard-stick  does  lengths,  the  pound  weights  and  the  bushel  solid 
contents.  Gold  is  not  at  all  times  the  product  of  an  equal 
amount  of  labor.  When  a day’s  work  will  produce  more  than 


1 


23.2  grs.,  production  is  stimulated,  and  depreciation  follows. 
But  the  amount  in  currency  and  bullion  throughout  the  world  is 
so  large  that  hitherto  the  effect  of  any  increase  has  been  very 
gradual.  Since  the  remarkable  discoveries  in  California  and 
Australia,  more  than  twenty  years  ago,  and  the  gross  addition  to 
the  treasure  of  the  nations  of,  say,  two  thousand  million  dollars, 
it  is  estimated  that  in  England  gold  has  fallen  in  value  twenty 
per  cent,  in  New  York  much  more  than  that,  and  in  the  neigh- 
borhood of  the  mines  still  more.  A man  who  loaned  “trust 
money  ” twenty -three  years  since  at  seven  per  cent,  returnable  in 
specie,  has  not  probably  received  in  interest  more  than  five  per 
cent,  while  the  principal  is  not  now  worth  more  than  seventy 
per  cent  of  its  former  value.  But  recent  events,  on  so  large  a 
scale,  are  not  likely  to  be  repeated,  and  the  precious  metals 
still  remain,  all  things  considered,  the  most  perfect  measures 
of  value  now  possible.  Nor  would  it  be  difficult  to  prove  that 
they  are  the  most  economical.  It  is  not  true  that  they  are  un- 
suited to  a brisk,  enterprising,  commercial  people  like  ourselves. 
In  the  large  cities,  where  the  commodities  of  the  country  are  ex- 
changed, and  trade  is  most  active,  there  is  little  need  of  'any 
other  currency.  In  these  places,  expedients  are  adopted — banks 
and  clearing-houses  instituted — so  that  a much  smaller  amount 
of  money,  in  proportion  to  the  exchanges  made,  is  required  than 
any  where  else.  By  the  agency  of  the  clearing-house  in  New 
York,  the  banks  of  that  city  pay  to  one  another,  in  ordinary 
times,  one  hundred  million  daily,  by  the  transfer  of  less  than 
three  million  in  cash.  In  the  smaller  transactions  of  a rural  pop- 
ulation, specie  as  the  sole  currency  is  not  inconvenient,  but  on 
many  accounts  the  most  desirable.  No  populous  country  in  the 
world  is  so  abundantly  and  cheaply  supplied  with  precious  metal 
as  the  United  States.  Yet  we  take  the  most  effectual  measures 
to  drive  it  from  our  shores,  and  to  deliver  over,  chiefly  to  our 
rivals  in  trade,  all  the  benefits  wdiich  in  theory  it  is  supposed  to 
confer.  For  centuries,  nations  have  been  striving  by  custom- 
house restrictions  and  prohibitions  to  draw,  each  to  itself,  the 
treasure  of  the  world;  but  we  have  been  laboring  with  better 
skill  and  more  success  to  get  rid  of  it. 

Under  the  impression  apparently  that  the  amount  of  money  in 
use  should  be  equal  in  value  to  the  exchanges  made  within  some 
indefinately  short  period,  say  a year,  it  is  often  remarked  by  the 
unthinking  that  “there  is  not  money  in  specie  enough  in  the 


world  to  do  the  business  of  the  country,”  meaning  thereby  that 
other  money  is  necessary  to  eke  out  the  supply.  Those  who  say 
thus,  some  of  them  governors  or  judges  of  our  highest  courts, 
forget  that,  of  all  the  payments  required  in  business,  a vast  ma- 
jority, reckoned  in  dollars,  is  made  by  book-credits,  bank  checks 
and  drafts,  and  that  the  same  coin  may  pay  a dozen  debts  in  the 
same  day.  A rich  people  like  the  English,  having  a varied  and 
complex  industry,  and  doing  an  unequaled  amount  of  business, 
are  most  economical  in  the  use  of  a circulating  medium.  I sup- 
pose that  Khode  Island,  with  its  sixty-two  banks,  its  active  trade 
and  nimble  sixpences,  does  not  employ  in  proportion  to  its  ex- 
changes, a tenth  part  as  much  currency  as  Texas.  An  extensive 
business  then  may  not  demand  a very  large  circulation. 

Again,  it  should  be  remembered  that  the  efficiency  or  sufficien- 
cy of  a medium  of  exchange  has  no  connection  with  its  quantity 
or  volume,  but  depends  solely  on  its  value — in  the  present  case  on 
its  cost  in  labor.  To  meet  the  pressing  wants  of  trade,  and  per- 
form the  office  of  money,  a certain  value,  in  other  words,  a given 
number  of  days’  work,  is  required,  and  this  cannot  be  increased 
or  diminished  so  long  as  the  exchanges  to  be  made  remain  the 
same.  As  only  a definite  number  of  transportation  wagons  can 
be  used  to  carry  to  market  a certain  amount  of  goods,  so  only  a 
fixed  value  in  money  can  be  employed  to  transfer  the  same  goods 
from  the  producer  or  seller  to  the  buyer.  The  cases  differ  how- 
ever. The  unused  wagons  would  be  left  by  the  roadside  to  rot, 
while  the  superfluous  money  would  temporarily  become  a part 
of  the  currency,  swelling  its  volume  without  increasing  (unless 
momentarily)  its  value.  As  value  does  not  determine  the  suf- 
ficiency of  the  wagons,  so  quantity  does  not  determine  the  suf- 
ficiency of  the  money.  Money  has  but  one  essential  attribute, 
and  that  is  value — exchangable  value.  That  it  may  perform  its 
office  perfectly,  volume  is  no  more  needful  than  length  or  color. 
Unlike  iron  and  coal  and  every  other  product,  its  usefulness  is 
independent  of  any  common  quality.  The  name  too  is  nominal, 
evanescent,  but  the  value  is  real  and  permanent.  In  the  business 
of  buying  and  selling,  coined  gold  is  fifteen  and  a-half  times  more 
efficient  than  coined  silver  for  the  sole  reason  that  it  is  more 
valuable  in  that  proportion.  If  the  mines  become  more  produc- 
tive so  that  a day’s  labor  will  secure  more  precious  metal,  say 
thirty  grains  instead  of  twenty-three  and  two-tenths,  the  weight 
of  the  dollar  must  be  increased  six  eight  tenth  grains,  or  the  coin 


9 


will  depreciate  as  compared  with  commodities  whose  cost  has  not 
been  reduced — so  depreciated  that  the  larger  whole  will  have  no 
more  value  than  the  smaller  had  before.  The  two  wholes  will  do 
the  required  service  equally  well.  In  case  the  weight  <ff  the  coin 
be  augmented,  each  man  will  carry  more  gold  in  his  pocket,  but 
will  be  no  richer  than  before,  and  can  command  no  more  of  the 
conveniences  and  luxuries  of  life.  On  the  other  hand,  if  the 
weight  be  not  changed,  each  person  will  have  more  dollars  than 
formerly,  but  will  find  himself  no  better  off  when  he  takes  them 
to  market.  The  poor  fellow  who  happens  to  have  been  a credi- 
tor before  the  change — a creditor  on  account  of  labor — is  indeed 
poor.  He  is  obliged  to  be  satisfied  with  23.2  grs.  of  gold  received 
at  a time  when  the  services  previously  rendered  would  command 
thirty  grains.  He  gave  say  one  hundred  days’'  work,  and  gets  the 
value  of  seventy-seven  days.  The  wrong  is  no  less  grevious  be- 
cause there  is  no  remedy. 

It  follows  from  what  had  been  said  that  no  industrious,  willing 
people  who  have  gold  and  silver  mines  of  their  own,  or  are  in 
commercial  intercourse  with  nations  which  have  such  mines,  can 
be  without  a sufficient  currency.  This  will  be  obvious  when  it 
is  remembered  that  value  not  quantity  is  demanded.  The  need 
of  gold,  in  other  words  the  demand  for  it,  will  call  forth  a sup- 
ply. No  matter  how  scarce  or  difficult  to  be  obtained,  or  what 
the  cost  per  ounce,  so  long  as  it  is  to  be  had,  and  there  is  a 
market  for  it,  it  will  come  when  called.  One  thousand  grains 
will  go  as  far  as  two  thousand,  provided  they  represent  as  much 
labor.  Satisfying  a nearly  indispensable  want,  and  bringing  to 
the  producer  an  adequate  reward,  the  supply  of  gold  can  no 
more  fail  than  that  of  iron  or  cloth.  It  is  true  it  costs  something. 
To  obtain  its  benefits,  a nation  must  sacrifice,  or  rather  sequester, 
millions  in  labor,  but  the  expense  is  little  when  compared  with 
the  facilities  and  conveniences  it  provides. 

In  one  particular,  gold  as  money  differs  from  every  other  com- 
modity. The  demand  ceases  when  a certain  value  has  been  ob- 
tained. More  money  may  be  coined,  but  the  slight  depreciation 
it  will  undergo  will  cause  its  ejection  from  the  circulation.  Its 
value  in  the  arts  and  for  exportation  being  undiminished,  the 
surplus  will  quickly  disappear.  Dollars  will  not  be  paid  out  for 
goods  when  bullion  is  worth  more  than  coin.  Promptly  they 
will  go  into  the  melting-pot,  and  any  disparity  which  may  have 
existed  will  be  rectified. 


2 


10 


Much  has  been  said  in  recommendation  of  an  elastic  currency 
— one  which  will  expand  as  the  demand  increases — and  at  this 
moment  the  brains  of  our  statesmen  and  financiers  are  vexed  with 
multitudinous  ideas  on  that  subject,  and  torn  with  the  throes  of 
a wondrous  parturition.  The  notion  of  an  elastic  measure  of 
value,  in  the  popular  sense,  is  like  that  of  an  extensible  yard- 
stick or  “rubber”  bushel,  and  my  impression  is  that  we  have 
had  enough  of  that.  I do  not  suppose  it  possible  to  invent  a 
safe  method  by  which  every  man,  or  even  every  solvent  man, 
can,  in  a time  of  panic,  have  cash  means  enough  to  pay  all  his 
debts  at  the  moment  when  due.  The  only  elastic  currency  which 
an  honest  man  should  endure,  or  which  pretends  to  be  a measure, 
is  furnished  by  specie.  As  in  a tempest  the  winds  rush  toward 
the  point  of  lowest  barometric  pressure,  so  in  a money-crisis, 
the  specie  of  the  world  flows  in  copious,  life-giving  streams  to- 
ward the  financial  storm-center,  filling  a temporary  void,  and 
comforting  the  afflicted.  We  are  now  only  ten  or  twelve  days 
from  the  great  treasure-stores  of  Europe,  where  there  are  hun- 
dreds or  thousands  of  eager  eyes  watching  the  barometer  in 
other  lands,  and  looking  for  an  investment.  Goods  will  find  no 
market,  but  specie  may  be  sent  with  beneficent  results  and  a 
telling  profit.  In  the  late  panic  in  New  York,  the  millions  of 
gold  which  came  pouring  in  from  Europe  brought  no  relief  be- 
cause our  local  currency,  often  expanding  but  never  contracting, 
had  “ demonetized ” it!  When  the  vacuum  in  a specie-paying 
country  is  filled,  the  incoming  stream  is  first  arrested,  then 
turned  back;  the  precious,  but  now  superfluous  metal  going 
abroad,  seeking  a better  market,  and  it  may  be,  relieving  the 
violence  of  other  panics.  This  perpetual  ebbing  and  flowing, 
this  fiux  and  reflux,  in  obedience  to  the  laws  of  attraction  and 
repulsion,  preserves  a just  equilibrium,  giving  to  each  country, 
according  to  its  needs,  its  due  proportion  of  the  money  of  the 
world.  Under  the  influences  named,  no  people,  if  government 
will  but  stand  aloof,  can  long  be  deprived  of  any  part  of  the 
currency  which  their  best  good  requires;  nor  can  they  retain 
more  than  their  proper  share.  The  to  and  fro  movement  by 
which  stringency  is  relieved  and  reducency  cured,  usually  quiet 
and  decorous,  but  sometimes  tumultuous,  corrects  inequalities, 
and  gives  us  a nearly  uniform  standard  of  value. 

A government,  not  deterred  by  the  fundamental  law — a law 


11 


so  plain  that  the  courts  of  last  resort  can  not  disregard  it — 
can  make  any  thing  legal  tender — acorns,  bits  of  leather  or  iron, 
or  scraps  of  paper — and  calling  it  money,  and  giving  it  the  names 
the  coins  bear,  compel  creditors  to  take  it  in  satisfaction  of  their 
claims.  In  this  way  a great  wrong  may  be  perpetrated — one 
class  plundered  and  another  enriched  on  an  enormous  scale, 
while  the  all-important  connection  between  industry  and  its  re- 
ward is  shamefully  severed.  In  our  time,  the  thing  which  is 
made  a substitute  for  hard  money  is  the  product  of  the  paper- 
mill  and  printing-press.  Pictured  promises  to  pay  dollars,  called 
notes  of  circulation,  are  issued.  They  cost  nothing,  have  no  intrin- 
sic value  and  contain  no  labor.  If,  however,  they  come  from  a 
source  in  which  men  have  confidence,  and  are  at  all  times  and  in 
convenient  places  convertible  into  coin,  they  will  rarely  be  pre- 
sented for  payment,  will  become  a part  of  the  currency,  and  have 
the  same  exchangeable  value  as  the  coin  itself.  As  an  effect,  this 
addition  will  depreciate  the  whole  mass  of  the  circulation,  now 
part  paper  and  part  specie;  at  first  slightly,  afterward,  if  the 
additions  be  continued,  more  conspicuously.  More  money  than 
before  will  be  in  the  hands  of  the  people;  more  consequently 
will  be  brought  to  market  to  be  exchanged  for  goods.  Increased 
competition  on  the  part  of  buyers,  and  the  comparative  indiffer- 
ence of  sellers,  will  be  followed,  according  to  the  well-known  law 
of  demand  and  supply,  by  augmented  prices.  This  appreciation  is 
in  truth  owing  to  a fall  in  the  value  of  dollars;  but  it  is  attended 
by  enhanced,  or  seemingly  enhanced  profits,  and  succeeded  by 
additional  production.  More  labor  is  sought  and  more  wages 
must  be  paid.  This  increased  cost  of  production,  if  supported 
by  further  issues  of  notes,  will  sustain  prices,  while  the  eagerness 
of  purchasers  will  continually  advance  them.  Erelong,  goods  of 
domestic  growth  and  manufacture  become  too  high  for  exporta- 
tion. The  foreign  merchant,  who  compares  specie  values  in  dif- 
ferent countries,  and  is  quick  to  learn  where  he  can  buy  cheapest, 
goes  to  other  markets.  At  the  same  time,  imported  goods  have 
participated  in  the  upward  movement.  They  have  risen  in  price 
and  been  quickly  sold,  filling  the  coffers  of  the  importer.  The 
latter,  improving  his  opportunity,  sends  new  and  larger  orders 
to  his  correspondents.  Thus  our  markets  and  price-lists  become 
irresistibly  attractive  to  the  foreigners  who  wish  to  sell,  but  re- 
pulsive to  any  who  desire  to  buy.  No  fact  shows  this  more  plainly 
than  the  augmented  imports  and  diminished  exports.  Constantly, 


12 


during  the  inflation,  specie  is  leaving  the  country,  driven  out  by 
paper.  It  goes  in  search  of  a better  market,  and  helps  to  pay  a 
foreign  debt.  This  movement  is  salutary — in  the  highest  degree 
conservative.  It  depletes  the  currency,  tends  to  drag  down 
prices,  and  does  what  it  may  to  preserve  a just  measure  of  value. 
But  the  outward  flow  is  at  first  insufficient  to  accomplish  the 
desired  object,  otherwise  it  would  cease.  In  some  of  its  aspects 
it  is  to  be  deplored,  but  it  is  the  only  thing  which  will  compel 
the  note-issuers  to  take  in  sail,  and  restore  trade  to  its  customary 
channels.  Like  the  locomotive’s  whistle,  it  is  the  signal  of  dan- 
ger,— a warning  which,  if  heeded  in  season,  will  save  a nation 
f 1 am  disaster.  Continue  it  must  till  its  primary  and  chief  cause, 
a redundant  circulation,  is  removed. 

But  the  credit-system  provides  methods  for  staving  off  the 
crisis.  The  banks  (if  these  be  the  note-issuers)  may  be  more 
conservative  than  the  average  business  man,  but  the  facilities 
they  are  unwilling  to  afford  are  supplied  by  private  bankers  and 
others.  In  the  meantime,  excitement,  stimulated  and  upheld  by 
the  paper  inundation,  has  taken  hold  of  the  people,  and  spreads 
over  the  land.  Honest,  plodding  industry  is  discouraged,  and 
thousands  are  tormented  with  the  desire  to  become  rich  quickly. 
Tillers  of  the  soil  turn  their  farms  into  building  lots,  and  take 
ventures  in  cunningly-devised  schemes  of  wealth — in  mining 
companies,  petroleum-companies,  South  sea-bubbles  and  railroad 
swindles.  Money-brokers,  insurance  agents  and  “ traveling  mer- 
chants ” crowd  the  business  avenues.  Every  where  men  are  run- 
ning up  and  down,  “ prospecting,”  trading,  borrowing  and  giv- 
ing questionable  notes.  The  restless  people  continually  buy  and 
sell  or  exchange,  cyphering  out  a profit  on  each  transaction. 
Economy  is  scouted,  and  munificent  expenditure  applauded. 
New  churches  are  built,  towns  “bonded,”  salaries  are  raised  (or 
stolen),  and  the  old-fashioned  means  of  salvation  and  worldly 
thrift  despised;  while  over-reaching,  fraud,  defalcation,  peculation 
and  bribe-taking  are  of  frequent  occurrence. 

The  day  of  reckoning  at  last  comes.  A foreign  debt  has  been 
contracted,  which  cannot  be  paid  in  high-priced  goods.  Specie, 
which  has  been  quietly  leaving  the  country,  and  has  now  become 
comparatively  scarce,  is  still  needed  by  the  importing  merchants. 
To  supply  the  demand,  the  holders  of  circulating  notes  present 
them  for  redemption.  The  scanty  store  of  the  banks  is  soon 
alarmingly  depleted.  The  locomotive’s  whistle,  long  unheeded, 


13 


has  now  a terrible  significance.  Those  joyous  notes,  finest  work 
of  the  engraver’s  art,  when  once  redeemed,  are  carefully  locked 
up,  and  a rapid  curtailment  in  all  directions  is  begun.  At  a 
time  when  maturing  paper  to  be  provided  for  is  most  abundant, 
when  business  is  most  expanded,  and  the  wants  of  trade  greatest, 
discounts  are  refused,  and  the  accepted  medium  of  exchange  is 
largely  withdrawn.  For  every  dollar  paid  in  specie,  the  banks 
find  it  needful  to  retire  five  or  ten  in  their  own  notes,  always 
doing  as  much  in  that  Avay  as  their  customers  can  bear  without 
breaking.  Distrust  follows,  depositors  become  alarmed,  and  re- 
ports of  failures  fill  the  air.  In  anticipation  of  a “ suspension,” 
every  one  wants  to  exchange  bank-credit  for  gold  on  the  same' 
day.  The  upshot  is  a panic,  and  grown  men  behave  like  a crowd 
of  children  trying  to  escape  from  a school-house  on  the  cry  of 
fire.  Fortunes  melt  away,  and  a whole  community  goes  down 
in  bankruptcy,  the  effects  of  which  are  felt  in  the  remotest 
corners  of  the  land. 

Many  of  us  remember  the  order  of  events  as  they  occurred 
under  the  state-bank  system  in  1837,  ’39,  ’47,  ’57  and  ’61. 
This  system  was  not  so  bad  as  that  of  an  earlier  or  later  period. 
In  connection  with  the  Suffolk  redemptions,  it  gave  for  New 
England  an  uniform  currency,  every  dollar  of  which,  in  ordinary 
times,  was  worth  its  face  in  gold.  But  it  was  not,  as  at  the  time 
claimed,  “ the  best  in  the  world,”  much  more,  the  best  possible. 
The  banks  (certainly  in  Connecticut)  had  practically  the  power 
of  almost  unlimited  issue,  and  were  constantly  striving  to  push 
out  and  keep  out  their  bills.  They  were  only  restrained  by  the 
unwillingness  of  responsible  men  to  take  and  hold  them  as  de- 
sired. The  profit  which  was  expected  from  an  exchange  of  non- 
interest-bearing  bills  for  interest-paying  notes  was  a constant 
temptation  to  take  inadequate  security,  which  was  not  always  re- 
sisted. The  losses  from  this  source,  in  certain  quarters,  were  not 
without  importance.  There  was  an  increasing  flow  of  currency  to 
and  from  the  redeeming  agency  in  Boston,  each  bank  gathering 
up  and  transmitting  at  short  intervals  the  notes  of  other  banks, 
and  receiving  its  own.  Balances  were  paid  promptly  by  drafts  on 
New  York.  If  any  bank  refused  to  take  part  in  this  arrangement, 
its  bills  were  still  redeemed,  and  an  agent  dispatched  to  demand 
the  specie.  The  annoyance  and  frequent  inconvenience  of  this 
demand  brought  the  offender  to  terms.  The  cost  to  the  remoter 
banks  of  the  Suffolk  system,  and  the  loss  on  the  permanent  de- 


14 


posit  which  each  was  required  to  keep  with  the  agency,  to 
say  nothing  of  the  risks,  were  considerable.  In  times  of  strin- 
gency, when  discounts  were  most  called  for,  the  bills,  sometimes 
in  unbroken  packages,  went  tumbling  into  Boston,  and  the  funds 
which  had  been  usually  lent  to  business-men  were  largely  re- 
quired for  redemption.  To  meet  this  new  demand,  contraction 
was  everywhere  enforced.  If  an  institution  faltered,  its  notes 
were  “ thrown  out  ” at  the  Suffolk.  Too  often  in  the  end  credit 
toppled  over,  and  closed  doors,  suspended  industry  and  financial 
ruin  followed.  Then  came  a period  of  stagnation,  dejection,  low 
prices,  economy,  discouraging  profits  and  cheap  money,  some- 
times lasting  several  years.  The  collapse  which  succeeded  the 
crises  of  1837  and  ’39  did  not  give  place  to  moderate  prosperity 
till  1844.  Recuperation  was  usually  more  rapid. 

The  Suffolk  system,  among  those  who  supported  it,  did  not  en- 
force specie  redemptions,  and  therefore  was  not  a safeguard 
against  expansion.  It  preserved  uniformity,  made  the  bills  of 
the  remotest  banks  current  at  par  every  where  in  New  England, 
prevented  each  from  keeping  out  more  than  its  proportion  of 
notes,  and  did  everything  which  the  plan  proposed;  but  good  as 
it  was,  it  gave  no  security  against  a general  expansion  and  in- 
flated prices.  If  each  and  every  institution  chose,  on  the  same 
day,  to  increase  its  circulation  ten  per  cent,  there  was  no  power 
in  the  Suffolk  to  restrain  the  movement.  In  the  memorable  crisis 
of  1837,  when  the  Boston  system  was  in  full  operation,  when 
prices  had  risen  twenty  or  thirty  per  cent,  and  wheat  was  import- 
ed from  the  Mediterranean,  the  New  England  banks  found  that 
they  were  carrying  (notwithstanding  the  checks  provided  by  the 
Suffolk)  a dangerous  amount  of  canvass,  and  like  others  were 
wrecked  in  the  storm. 

Under  the  old  banking  system,  the  country,  most  of  the  time, 
was  going  through  a period  either  of  inflation,  high  prices  and 
speculation,  or  one  of  contraction,  falling  prices  and  exhaustion, 
followed  by  slow  convalescence  and  returning  thrift.  There  was 
little  stability,  not  much  certainty;  prosperity  was  spasmodic, 
revulsions  frequent,  and  success  problematical.  Though  the  cur- 
rency were  convertible,  and  coin  could  be  had  for  it  when  no- 
body wanted  it,  the  proportion  of  specie  to  circulating  notes  in 
the  banks  was  ridiculously  small — so  small  that  an  important 
failure  like  that  of  the  Ohio  Life  and  Trust  Co.,  in  1857,  a run 
upon  a large  bank,  or  anything  which  alarmed  bill-holders  or 


15 


depositors,  endangered  the  system.  The  moneyed  fabric  which 
hypothetically  rested  on  gold  for  its  foundation,  was  poised  upon 
its  apex,  and  fell  with  a crash  when  a few  disks  were. taken  from 
its  support.  It  did  well  enough  in  fair  weather  when  the  ele- 
ments were  hushed,  but  went  down  when  the  winds  were  loosed 
and  the  earth  quaked,  wrecking  the  fortunes  and  hopes  of  half  a 
continent. 

A mixed  currency,  like  ours  before  the  war,  consisting  of  pa- 
per and  specie,  may  be  greatly  improved  by  increasing  the  pro- 
portion of  the  latter  so  that  the  removal  of  a few  million  to  pay  a 
foreign  balance,  or  to  allay  the  fears  of  an  excited  populace,  will 
not  enforce  a severe  contraction.  The  larger  this  proportion, 
the  more  may  be  removed  without  inconvenience  and  insecurity. 
But  any  reserve  which  it  might  be  expedient  to  hold  for  extraor- 
dinary emergencies  should  be  within  the  reach  of  the  banks 
when  most  needed.  In  former  times,  the  required  proportion  of 
specie  to  notes  (one  to  ten  in  Connecticut)  must  be  kept , and 
could  not  be  used  to  redeem  the  latter  without  a violation  of  the 
law.  Thus  the  only  legitimate  object  of  the  legal  reserve — re- 
lief in  seasons  of  pressure  and  peril — was  defeated.  In  its  prin- 
ciple, the  English  system  is  doubtless  the  best  extant  or  now 
possible.  The  Bank  of  England  issues  no  notes  under  five  pounds, 
(nearly  twenty-five  dollars,)  making  it  needful  that  much  specie 
should  be  in  the  hands  of  the  people.  Its  charter  does  not  allow 
it  to  emit  bills  exceeding  fifteen  million  pounds  (seyenty-three 
million  dollars)  except  it  retain  in.  its  vaults  an  equal  amount  of 
gold.  This  gold,  against  which  bills  are  emitted,  is  sacredly 
kept  for  the  protection  of  bill-holders,  and  (as  I understand  the 
facts)  cannot  be  paid  to  any  other  class  of  creditors.  For  its 
purpose,  it  has  hitherto  not  proved  inadequate.  For  the  security 
of  deposits  (now  much  larger  and  far  more  important  as  a means' 
of  making  payments  than  thirty  years  ago  when  the  bank  was 
chartered)  there  is,  on  the  part  of  the  institution,  only  a general 
liability;  and  this  seems  to  be  the  weak  part  of  the  system.  Its 
strong  point  is  this:  The  bank  can  pay  to  bill-holders  any  part 
or  the  whole  of  its  gold  reserve,  amounting  to,  say,  eighteen 
million  (eighty-seven  and  a-half  million  dollars)  without  taking 
from  the  people  more  money  than  it  returns  to  them — more  in 
paper  than  it  give  back  in  specie.  It  has  no  power  to  contract 
or  expand  the  currency,  but  leaves  this  to  be  regulated  exclusive- 
ly by  the  wants  of  the  public  and  the  laws  of  trade — leaves  it 


16 


with  all  the  elasticity  (if  this  he  the  word)  which  specie,  as  the 
sole  medium  of  exchange,  could  have.  It  is  managed  with  con- 
sumate  skill,  and,  in  an  important  sense,  upholds  the  moneyed 
system  of  Europe  and  the  world. 

No  system — no  possible  system — can  wholly  prevent  temporary 
fluctuations  in  the  demand  for  money.  These  sometimes  depend 
on  physical  conditions  which  lead  to  abundant  or  deficient  crops; 
and  may  be  connected  with  mental  influences.  Men  are  subject 
to  excitements,  sudden  frights  and  periodical  phrensies.  These 
are  contagious  or  epidemic;  seize  hold  suddenly  of  a whole  com- 
munity, and  overthrow  the  reason.  At  times  they  control  con- 
duct in  all  the  departments  of  life,  and  turn  this  world  into  a 
bedlam.  Human  nature  is  made  up  largely  of  emotional,  sen- 
sational and  sympathetic  elements,  and  should  not  be  expected 
to  exhibit  prudence,  common  sense  and  good  judgment,  except 
intermittingly.  The  stampedes  among  the  horses  and  cattle  at 
the  west  are  not  more  irrational  than  the  panics  to  which  human 
beings  are  liable.  Until  we  find  some  certain  means  of  forestal- 
ling these,  we  shall  not  always  be  able  to  control  madness  in 
the  money-market. 

After  the  adoption  of  the  Federal  Constitution,  and  up  to  a 
recent  period,  it  was  supposed  that  the  general  government,  like 
the  states,  had  no  authority  to  issue  paper  money,  much  more  to 
make  it  a legal  tender.  One  of  the  objects  of  the  convention  of 
1 787  was  to  get  rid  of  it  as  an  intolerable  nuisance.  Rhode  Is- 
land, which  was  profiting  by  its  continued  emissions  to  the  anoy- 
ance of  its  neighbors,  sent  no  delegates,  and  held  itself  aloof 
because  of  this  known  object.  The  convention  tried  faithfully 
to  do  in  this  regard  all  that  was  expected.  Not  only  were  the 
states  inhibited,  but  it  refused  by  a vote  of  nine  states  against 
two  to  give  the  power  to  “ emit  bills  of  credit,”  afterward,  by  a 
decision  of  the  Supreme  Court  of  the  United  States,  January, 
1837,  defined  to  be  “a  paper  issued  by  the  sovereign  power,  con- 
taining a pledge  of  its  faith,  and  designed  to  circulate  as  money.” 
Till  the  late  Rebellion,  it  was  supposed — it  was  even  a matter  of 
self-gratulation — that  we  were  secure  against  the  possible,  the 
oft-proved  danger,  of  “paper  issued  by  the  sovereign  power,” 
“ and  designed  to  circulate  as  money,”  and  especially  against  all 
laws  making  it  a legal-tender.  But  the  alleged  necessities  of  a 
great  war  prosecuted  professedly  for  the  sake  of  the  constitution 


i 1 


and  its  supremacy,  overthrew  the  barriers  which  our  fathers,  still 
smarting  from  the  evil,  had  erected.  The  debate  which  followed 
the  introduction  of  the  bill  authorizing  the  issue  of  treasury  notes 
forcirculation,  and  making  them  lawful-tender,  was  (and  doubt- 
less felt  to  be)  a solemn  farce.  The  tender  provision  was  stoutly 
resisted  in  the  senate,  but  in  the  house  met  with  little  opposition. 
Mr.  Fessenden  justified  it  on  “ the  ground  of  absolute,  over- 
whelming necessity;”  others  cared  only  to  know  whether  it  was 
“useful,  convenient,  profitable.”  Our  colonial  and  Revolution- 
ary experience,  and  the  history  of  paper  money  every  where, 
prove  that  the  tender-provision — the  worst  part  of  the  law — was 
in  no  way  essential,  and  did  nothing  to  prevent  or  even  retard 
depreciation.  In  every  point  of  view,  it  was  a stupendous  blun- 
der. Its  retroactive  operation  wrought  profitless  and  gratuitous 
wrong  on  a prodigious  scale.  Had  it  not  been  for  this  oppressive 
provision,  the  sufferers  would,  long  ago,  have  recovered  their 
rights,  and  by  legal  process,  at  the  close  of  the  war,  have  en- 
forced resumption,  at  least  by  the  banks.  They  would  have 
compelled  Col.  Scott’s  railroads  and  other  corporations  to  pay 
their  debts  contracted  before  the  war  in  dollars  equivalent  to 
gold,  according  to  contract.  Of  the  remarkable  decision  of  the 
Supreme  court  of  the  United  States  reversing  a m ost  righteous 
decision  of  the  same  court,  and  of  the  extraordinary  means  used 
to  procure  it,  I have  an  opinion  which  I shall  not  here  express. 
History  will  speak  of  -all  in  fitting  terms. 

On  the  fourth  of  March,  1861,  the  thirty-sixth  Congress  ex- 
pired, not  having  made  the  smallest  preparation  for  the  now  in- 
evitable conflict  which  was  to  begin  in  April.  Congress  again 
met  in  July,  in  special  session.  Its  business  was  to  ratify  the 
acts  of  the  President,  and  provide  ways  and  means  to  carry  on 
the  war.  As  in  the  Revolution,  the  thoughts  of  the  government 
were  immediately  turned  to  paper  money  as  an  inportant  resource. 
Fifty  million  in  treasury-notes,  receivable  for  public  dues,  and 
redeemable  on  demand  in  coin,  were  at  once  authorized  and  issued, 
to  which  ten  million  were  afterward  added.  These  were  declared 
by  the  officials  to  be  “ as  good  as  gold,”  u and  for  many  purpo- 
ses more  convenient  and  valuable.”  The  amount  was  large,  but 
as  the  banks  had  curtailed  their  circulation,  and  mens’  minds 
were  gloomy  and  apprehensive,  and  indisposed  to  speculation, 
they  produced  no  excitement,  quietly  became  a part  of  the  cur- 
rency, and  did  not  depreciate,  even  after  specie  payment  was 


18 


suspended,  at  the  close  of  the  year.  The  success  of  the  experi- 
ment pleased  the  secretary  of  the  treasury,  Mr.  Chase.  He  had 
been  beating  about  among  the  capitalists  of  New  York  with  in- 
different success;  had  harried  the  banks,  and  after  pumping  them 
dry,  driven  them  to  bankruptcy.  Very  naturally,  he  sought  re- 
lief from  the  embarrassment  and  humiliation  of  his  position. 
Possessed,  seemingly,  of  the  prevalent  idea  that  the  war  would 
end  “ in  sixty  or  ninety  days,”  he  resorted  to  temporary  shifts, 
was  averse  to  long  loans,  paid  reluctantly  the  market  price  of 
money,  and  was  pervaded  with  a passionate  and  costly  desire  to 
save  interest.  The  two  hundred  and  two  million,  (one  hundred 
and  fifty  million  in  the  loyal  states,)  which  the  state  banks  circu- 
lated at  the  beginning  of  the  year,  with  little  cost  and  much 
profit,  were  looked  at  with  envious  eyes.  As  the  result,  on  the 
twenty-fifth  of  February,  1862,  Congress  authorized  the  emis- 
sion of  one  hundred  and  fifty  million  of  legal-tender  notes  for 
circulation,  sixty  million  of  which  were  to  be  used  to  take 
up  the  outstanding  gold-notes.  If  report  is  to  be  trusted, 
however,  the  insertion  in  the  act  of  the  tender-clause  was  opposed 
by  the  secretary.  On  the  eleventh  of  July  following,  more 
money  was  wanted,  and  one  hundred  and  fifty  million  new  notes 
were  authorized,  fifty  million  to  be  reserved  for  the  payment  of 
temporary  loans.  Another  installment  of  one  hundred  and  fifty 
million  of  the  same  notes,  for  the  payment  of  the  army  and  navy, 
were  ordered  on  the  seventeenth  of  January  and  third  of  March, 
1863.  At  the  last  named  date,  Congress  also  provided  for  the 
issue  of  four  hundred  million  three  year,  legal-tender,  interest- 
bearing  notes,  convertible  at  their  face  value  into  legal-tenders 
of  previous  issues.  In  this  manner  the  work  went  bravely  on — 
eight  hundred  and  fifty  million  of  paper  money  in  one  year  and 
six  days  ! The  whole  of  these  amounts  were  never  issued,  while 
the  compound  interest  notes,  after  remaining  in  circulation  till 
considerable  interest  had  accrued,  were  withdrawn  and  held  for 
investment. 

Mr.  Chase,  the  great  finance  minister  of  the  war,  indefatigable 
and  incorruptible  in  the  midst  of  corruption,  was  fertile  in  expe- 
dients, ingenious  in  his  methods,  sincere  and  always  plausible. 
But  he  was  infatuated  with  the  desire  “ to  place  ” his  five  per 
cent  loan,  and  hesitated  not  to  sacrifice  two  dollars  in  the  cost  of 
war-supplies  to  save  one  in  interest.  Incalculable  was  the  in- 
jury which  this  insane  policy  inflicted  on  the  nation.  Though 
professedly  alive  to  the  recognized  evils  of  inflation,  in  order 


19 


“to  float”  his  five  per  cents,  he  used  his  optional  power,  and  per- 
sisted in  pushing  out  his  legal-tenders  in  the  most  reckless  way, 
till  impending  ship-wreck  stayed  his  hand,  and  the  country  be- 
came alarmed.  When  less  than  seventy-four  million  of  his  fa- 
vorite loan  had  been  placed  at  par,  and  after  Congress  had  en- 
deavored by  a foolish  law  of  thirteen  days’  duration  to  check 
the  “rise”  of  gold,  then  at  one  hundred  and  fifty-four  per 
cent  premium,  he  felt  constrained,  June  13th,  1864,  to  resign 
his  office.  On  the  same  day,  Congress,  in  a new  loan-act, 
pledged  itself  to  the  people  in  this  wise:  “Nor  shall  the  total 
amount  of  United  States  notes  issued,  or  to  be  issued,  ever  ex- 
ceed four  hundred  million  of  dollars,  and  such  additional  sum, 
not  exceeding  fifty  million  of  dollars,  as  may  be  temporarily  re- 
quired for  the  redemption  of  temporary  loans.”  The  war  closed 
with  four  hundred  and  thirty-one  million  of  greenbacks  outstand- 
ing, which  amount  was  soon  reduced  to  the  legal  limit.  But 
the  national  banks  were  allowed  to  go  on  expanding  the  curren- 
cy, carrying  the  total  of  their  issues  from  one  hundred  and  twen- 
ty million,  at  the  end  of  the  war,  to  three  hundred  and  thirty- 
eight  million  in  April,  1873.  The  fractional  notes  are  now 
nearly  forty-five  million  of  dollars. 

The  legal-tender  issues  authorized  in  February,  1862,  began 
to  make  their  appearance  in  April,  when  gold  stood  at  one  and 
three  quarters  per  cent  premium.  Business  was  generally  stag- 
nant, and  there  was  little  demand  for  them.  Existing  obstacles 
soon  gave  way,  and  erelong  their  proper  effects  in  the  usual  or- 
der began  to  appear.  First  gold  and  bills  of  exchange  moved 
upward.  Then  the  sounder  bonds  and  stocks,  such  as  prudent, 
suspicious  men  buy  in  boisterous  times  were  effected.  Still  later, 
the  stocks  of  second  quality,  and  the  goods  produced  and  con- 
sumed within  the  year,  felt  the  stimulus.  Not  long  after,  other 
goods  and  real  estate  in  the  commercial  centers  commanded  bet- 
ter prices.  When  another  interval  had  elapsed,  securities  of  un- 
certain value,  and  property  which  had  long  been  unsalable,  found 
a ready  market.  As  dollars  became  more  plentiful  and  prices 
more  and  more  buoyant,  men  got  excited,  and  a spirit  of  specu- 
lation was  engendered.  Each  had  more  pictured  promises  in  his 
pocket  and  a larger  bank  deposit  than  before,  while  those  who 
were  usually  straitened  were  in  funds.  The  competition  of 
eager  buyers  gave  sellers  an  advantage  long  coveted.  Having, 
in  existing  circumstances,  no  usages  or  precedents  to  guide  them, 
with  no  knowledge  of  the  real  value  of  property  in  current  mon- 


20 


ey,  they  were  only  anxious  to  fix  the  prices  high  enough.  All 
engaged  in  making  or  exchanging  the  goods  or  estate  most  in 
demand  were  apparently  getting  rich.  This  of  course  intensified 
the  excitement,  and  led  to  changes  of  occupation.  As  is  always 
the  fact,  wages,  for  a considerable  time,  did  not  keep  pace  with 
other  things.  Laborers  received  as  many  dollars  as  before,  but 
when  these  were  exchanged  for  coats,  shoes,  fuel,  provisions,  &c., 
the  money  did  not  hold  out.  They  consequently  suffered  depri- 
vation. In  the  meantime  their  employers — manufacturers,  rail- 
road companies,  mining  companies,  &c.,  while  producing  at  for- 
mer cost,  and  selling  at  current  rates,  made  large  gains — gains 
which  took  nothing  from  the  ample  shares  of  contractors,  mer- 
chants, and  middle  men  of  every  name.  At  length  the  augment- 
ed demand  for  labor  caused  by  the  increased  demand  for  com- 
modities was  followed,  always  with  an  interval,  by  better  wages. 
Then  laborers  like  others  got  more  dollars,  and  in  the  end  as 
much  purchasing  power,  as  previously.  The  enlarged  consump- 
tion of  goods,  and  the  extravagance  which  a redundant  currency 
always  produces,  required  additional  production  and  more  work. 
This  new  work  must  needs  be  paid  for,  and  the  laborers  too  be- 
came prosperous.  Tardily  and  lastly,  the  advancing  tide  of 
paper-mill  prosperity  reached — no  approached — the  country  far- 
mers— the  owners  of  farming  lands.  At  the  close  of  the  late 
war,  farms  in  the  agricultural  districts  within  my  acquaintance 
would  sell  for  no  more  dollars  than  before.  If  our  husbandmen 
received  more  in  currency  for  butter,  eggs,  poultry,  and  other 
articles  which  could  be  conveniently  transported,  they  paid  more 
for  every  thing  they  bought.  Even  now,  ten  years  after  the 
flood,  (or  after  the  flood  was  highest,)  their  farms  will  fetch 
little  more  in  depreciated  paper  than  they  would  bring  in 
specie  (or  its  equivalent)  fifteen  years  ago.  The  thrift  (such  as 
it  is)  which  inconvertible  greenbacks  have  brought  to  the  cities 
and  business  centers  has  not  yet  reached  them. 

The  effects  of  paper  inflation  may  be  set  forth  in  this  way:  A 
man  in  the  second  year  of  the  war  filled  his  stores  with  goods, 
kept  them  under  lock  and  key,  and  at  the  end  of  the  year  sold 
off  enough  to  pay  his  notes,  and  made  a fortune  out  of  the  bal- 
ance. At  about  the  same  time,  a lumber  merchant  of  this  city 
purchased  his  annual  supply  of  lumber,  and  as  was  his  custom 
paid  cash  for  it.  When  the  year  closed,  he  had  apparently  made 
a good  profit,  but  t^ie  money  and  notes  received  would  not  buy  as 
much  lumber  as  at  the  beginning.  Then  he  went  into  the  mar- 


21 


ket  and  bought  largely  on  credit,  giving  long  notes.  His  next 
balance-sheet  showed  an  extraordinary  gain,  not  in  money  mere- 
ly but  in  purchasing  power.  After  some  costly  experience,  the 
holders  of  property  learned  to  sell  for  cash  only,  so  that  when 
the  war  closed  shrewd  business  men  were  generally  out  of  debt. 
The  flagrant  wrong  which  excessive  paper  issues  inflict  may  be 
illustrated  thus:  In  December,  1861,  a poor  soldier’s  widow  put 
into  the  savings  bank  two  hundred  dollars  in  specie,  and  then  re- 
moved with  four  young  children  and  friends  to  California.  In 
July,  1864,  when  gold  stood  at  two  hundred  and  eighty,  she 
sent  for  her  money.  In  return,  she  received  a gold  draft  for 
eighty-three  dollars,  accrued  interest  at  six  per  cent  included! 
An  instance  (one  of  a class)  of  similar  but  greater  injustice 
caused  by  “ continental  money  ” is  related  in  Gordon’s  History 
of  the  American  War.  It  illustrates  a principle.*  “A  mer- 
chant of  Boston  sold  a hogshead  of  rum  for  £20,  hogshead 
included.  The  purchaser  did  not  settle  for  it  till  after  the 
seller  applied  to  him  for  an  empty  hogshead,  for  which  he  was 
charged  £30.  When  they  came  to  settle,  the  merchant  finds 
upon  examining,  that  he  had  to  pay  a balance  of  £10  on  that 
very  cask,  which,  with  the  rum  it  contained,  had  been  sold  for 
£20.” 

Except  in  a qualified  and  peculiar  sense,  money  is  not  capital. 
It  has  no  direct  agency  in  production ; does  not  enter  as  a consti- 
tuent part  into  the  products  of  industry,  like  iron  or  cotton.  Of 
itself,  it  produces  nothing;  brings  no  gain  to  the  holder.  What 
is  called  interest  is  earned  wholly  by  capital,  and  is  paid  exclu- 
sively out  of  the  profits  of  the  latter.  He  who  has  money,  and 
wishes  to  obtain  an  income  from  it,  exchanges  it  without  delay 
for  capital.  The  exchange  once  made,  it  has  discharged  its  last 
office,  and  goes  into  other  hands  to  perform  a similar  service. 
For  the  purpose  of  hoarding,  without  reference  to  use,  it  is  worth 
no  more  than  any  other  measure,  say  a bundle  of  yard-sticks. 
Mr.  Chase,  in  paying  out  his  greenbacks,  supposed  he  was  pour- 
ing capital  into  the  country,  while  he  did  not  so  much  as  add  to 
the  value  of  the  circulating  medium,  (always  unproductive,)  as 
shown  in  another  place.  His  four  hundred  million  took  from  the 
value  of  the  whole  circulation,  old  and  new,  a sum  equal  to  the 
additional  volume. 


*1  have  referred  to  this  in  “ A Historical  Account  of  Connecticut  Currency,  Continental 
Money,  and  the  Finances  of  the  Revolution,  published  among  u Papers  of  the  New  Haven 
Colony  Historical  Society,”  in  1865. 


22 


To  set  forth  in  the  clearest  possible  light  the  nature  and  effects 
of  Mr.  Chase’s  measures,  I will  suppose  that  the  country  had  in 
circulation,  in  January,  1862,  (no  matter  what  the  sum,)  four 
hundred  million  of  dollars,  specie  value,  all  needed  for  the  legit- 
imate business  of  the  people.  I will  again  suppose  that  the  sev- 
eral new  emissions,  amounting  to  four  hundred  million,  were 
made  on  the  same  day;  that  no  currency  was  driven  out  of  circu- 
lation, and  that  the  effects,  instead  of  being  spread  over  several 
years,  were  everywhere  immediate.  There  would  then  be,  with 
the  additions,  eight  hundred  million  of  depreciated  paper  to  do 
the  work  of  the  previous  four  hundred  million,  and  having  the 
value  of  four  hundred  million  in  coin.  By  this  stroke  of  policy, 
the  secretary  made  a forced  loan,  and  got  control  of  two  hundred 
million,  specie  value,  paying  for  it  no  interest.  Now  let  us  see 
what  (on  the  supposition)  followed.  The  four  hundred  million 
is  paid  out  to  the  government  creditors,  mostly  to  soldiers,  sail- 
ors and  others  in  the  public  service.  As  two  of  the  new  dollars 
are  worth  no  more  than  one  of  the  old,  and  will  exchange  for  no 
more  in  the  market,  (all  commodities  having  doubled  in  nomi- 
nal value,  according  to  a law  already  explained,)  the  government 
creditors  get  but  the  half  of  what  was  their  due,  and  are  thus 
cruelly  wronged. 

Thus  far  the  loss  has  fallen  wholly  on  one  class,  and  does 
not  exceed  the  gain  the  government  has  made.  But  there  is 
another  class,  much  larger,  which  is  still  more  deeply  involved. 
The  new  notes  are  a legal-tender,  and  every  debtor  is  authorized 
to  discharge  his  moneyed  obligations,  dollar  for  dollar,  with  a 
much  depreciated  medium.  The  law  says  to  him:  “Notwith- 
standing you  agreed  to  pay  dollars  which  contained  each  23.2 
grains  of  gold,  or  ten  hours  work,  you  are  released  when  you 
have  paid  dollars  (half  dollars)  which  are  the  equivalent  of  11.6 
grs.,  or  five  hours  work.”  The  agreed  measure  of  value  has  been, 
thoughtlessly  or  wickedly,  changed  by  the ' sovereign  power. 
The  creditor  may  well  say:  “My  hard  earnings,  perhaps  the  ac- 
cumulation of  a life-time,  my  dependence  and  that  of  my  family 
in  causualty,  sickness  and  old  age,  have  been  ruthlessly  wrested 
from  me — wrested  by  a process  of  legerdemain  which  it  is  difficult 
to  understand, — and  there  is  nowhere  any  compensation.”  He  has 
placed  his  all  in  the  savings  bank,  or  a trust  company,  or  had 
bought?  a little  bank-stock,  or  a railroad-bond,  or  exchanged  his 
cow  or  horse  or  farm  for  a mortgage  note,  and  while  he  slept, 
his  government,  instituted  for  his  protection,  and  administered 


by  his  chosen  servants,  has  bereft  him  of  half  his  property,  per- 
haps made  him  almost  a pauper.  Possibly  he  would  be  content 
had  his  sacrifices  helped  to  save  the  institutions  once  dear  to  him, 
but  of  consolation  from  that  source  there  is  none. 

While  creditors  feel  that  they  have  been  unrighteously  dealt 
by,  debtors  are  jubilant.  They  have  reason  to  be.  By  a stroke 
of  the  pen,  wielded  in  their  behalf,  they  have  secured  the  pos- 
session of  a large  part  of  the  capital  of  the  country,  the  title  of 
ownership  to  be  enforced  when,  in  substantial  violation  of  the 
agreement,  they  have  paid  for  one-half  of  it!  Without  industry, 
or  economy,  or  good  management,  or  any  sacrifice,  they  have  ac- 
quired in  an  hour  more  wealth  than  others  have  obtained  by  the 
toil  and  sweat,  the  wear  and  tear  of  many  years.  Creditors  as 
a class  are  (or  used  to  be)  laborious,  prudent  men,  who  use  their 
means  productively,  wasting  nothing.  Were  it  otherwise,  they 
would  not  be  creditors.  They  employ  their  accumulations  in  build- 
ing and  equipping  factories,  ships,  steamboats  and  railroads;  in 
erecting  houses,  improving  lands  and  feeding  laborers.  In  no 
other  way  could  they  make  a profit.  Their  savings  constitute 
the  fund,  the  only  fund,  for  the  support  of  labor.  The  whole  of 
it,  directly  or  indirectly,  expenses  excepted,  is  paid  out  for  wages. 
On  the  other  hand,  debtors  as  a class,  are  less  industrious,  econ- 
omical and  vigilant;  do  not  manage  as  intelligently  and  prudently, 
and  are  more  given  to  scheming  and  wild  speculation;  otherwise 
they  would  not  be  debtors.  Possibly  they  live  beyond  their  means 
— are  perhaps  extravagant  and  negligent.  They  may  be  hard- 
working, temperate  men,  useful  and  worthy  members  of  society, 
bearing  cheerfully  their-  share  of  the  burdens  of  civilized  life,  but 
for  some  reason,  perhaps  not  apparent  to  themselves,  they  have 
not  the  thrift  of  others.  The  net  profits  of  their  business  go  to 
pay  interest  on  borrowed  capital;  or  if  they  save  anything  in 
prosperous  seasons,  to  be  used  in  hiring  more  laborers  and  pay- 
ing more  wages,  the  sum  is  small  and  uncertain.  Of  course  I do 
not  speak  of  the  general  intelligence,  honesty  or  virtue  of  the  re- 
spective classes,  but  view  them  from  the  stand-point  of  econo- 
mic science,  or  as  contributors  to  the  wealth  of  the  nation.  It 
cannot  be  doubted  that  every  material  interest  in  this  country, 
to  say  nothing  of  private  and  public  right,  requires  (especially  in 
times  of  unusual  strain,  when  the  demands  of  a great  war  must 
be  met)  that  capital  should  continue  in  the  hands  of  those  who 
have  earned  and  preserved  it,  and  will  employ  it  skillfully  and 
profitably  for  the  support  of  productive  industry.  To  a large  ex- 


24 


tent,  for  many  years,  it  has  been  in  other  hands,  placed  there  by 
act  of  Congress,  and  those  handsomely  engraved  instruments  of 
transfer,  vulgarly  called  green  backs.  Nobody  can  tell  the  pre- 
cise amount,  but  hundreds  of  millions  certainly,  were  thus  trans- 
ferred. 

On  the  supposition  that  the  effects  of  the  paper  expansion  were 
immediate,  the  sums  transferred  would  be  equal  to  the  one-half 
of  the  entire  indebtedness  of  the  country  to  be  paid  in  legal-ten- 
ders (deducting  any  compensations  which  creditors  might  re- 
ceive). Nor  would  the  amount  be  necessarily  diminished  by  the 
fact  that  the  government  notes  were  issued  in  installments,  or 
that  the  loss  was  in  many  cases  shifted  from  one  to  another,  and 
distributed  among  a larger  population,  and  spread  over  a con- 
siderable period.  If  the  depreciation  were  less  than  the  propor- 
tion supposed,  allowance  must  be  made  for  that.  In  any  event, 
the  losses  and  gains  were,  in  their  aggregates,  enormous.  The 
owners  of  permanent  indebtedness  alone;  the  holders  of  mort- 
gages and  bonds  of  different  kinds,  state,  county,  town,  city  and 
railroad,  to  say  nothing  of  the  public  creditors,  were  impover- 
ished several  times  more  than  all  the  government  gained.  This 
cancelling  of  obligations,  making  debtors  half  owners  of  the  vast 
amount  of  property  which  they  had  bought  but  not  paid  for, 
giving  them  sudden  but  unexpected  and  unearned  riches,  pro- 
duced of  course  the  greatest  excitement.  To  speculators  and 
gamblers,  a novel  and  wonderful  avenue  to  affluence  was  opened. 
Colossal  fortunes  were  acquired,  while  the  new  proprietors,  un- 
used to  so  much  wealth,  scarcely  knew  what  to  do  with  it.  Ex- 
travagance and  visionary  schemes;  palatial  residences,  country 
villas  and  splendid  equipages;  mammoth  hotels,  crowded  steam- 
ships and  activity  everywhere,  were  the  legitimate  fruits.  When 
men  operate  with  other  people’s  money,  with  no  restraints,  busi- 
ness is  always  lively,  enterprise  rampant. 

All  the  seeming  thrift  which  follows  a currency-inflation  may 
be  traced  to  transferred  wealth.  It  will  last  as  long  as  the  fund 
which  sustains  it.  When  this  is  gone,  men  recover  their  senses; 
industry,  frugality  and  good  conduct  in  business  receive  their 
just  reward,  and  property  returns,  by  a slow  and  painful  but  cer- 
tain process,  to  its  original  owners,  or  their  successors.  There 
it  will  remain  till  a new  inflation  (agrarianism  by  another  name) 
redistributes  it,  again  giving  it,  or  much  of  it,  to  speculators, 
perhaps  to  the  winds. 

In  specie-paying  times,  there  is  a fixed,  or  slightly  yielding 


25 


limit,  beyond  which  circulating  notes  cannot  he  pressed.  Con- 
vertibility and  a call  for  coin  will  check  and  force  back  upon  the 
issuers  any  excess.  But  under  the  reign  of  inconvertible  paper, 
there  is  no  similar  limit.  Eight  hundred  and  eight  thousand 
million  may  be  circulated  with  equal  ease.  Once  a part  of  the 
currency,  the  excess  will  remain,  having  no  way  of  escape.  Bill- 
holders  are  helpless,  and  there  is  nowhere  any  sell-controlling,  self- 
regulating power.  The  locomotive’s  whistle,  serving  in  specie- 
paying times  as  a storm-signal,  is  not  only  not  heard,  but  it  is  not 
sounded.  Nor  will  redemptions  of  bank  notes  with  greenbacks, 
at  central  points,  have  any  tendency  to  preserve  the  limit  and 
prevent  the  depreciation  of  both,  unless  indeed,  legal  tenders  be 
greatly  restricted — much  more  so  than  now.  When  prices  have 
been  adjusted  to  volume,  however  large,  every  dollar  will  be 
wanted,  and  there  will  be  (as  compared  with  the  new  prices)  no 
redundancy.  As  already  explained,  the  exchangeable  value  of 
the  whole  will  not  be  increased,  the  units  shrinking  in  value  in 
proportion  to  the  additions  made.  This  degradation  of  money, 
whether  by  abstracting  gold  from  the  coins,  or  by  excessive 
emissions  of  paper,  destroys  its  usefulness  as  a measure  of  value, 
and  makes  it  an  instrument  of  injustice  and  oppression.  Far 
better  would  it  be  if  government  provided  no  measure,  and  left 
the  people  to  their  own  devices.  To  set  up  a standard,  force 
men  to  use  it,  and  then  falsify  the  pledge  given  to  those  who 
put  their  trust  in  it — committing,  perhaps,  their  all  to  it — is  more 
heathen  than  Christian.  As  justly  could  the  yard-stick  be  short- 
ened by  law,  and  all  those  under  contract  to  receive  yards  at  a 
stipulated  price  be  compelled  to  take  new  yards  for  the  old  ones 
without  any  deduction  in  price.  Indeed,  the  wrong  in  the  last 
case  would  be  of  a mitigated  character  from  the  fact  that  the 
dealers  in  cloth,  &c.,  are  comparatively  few,  while  in  the  other 
case  all  dealers  are  equally  affected.  One  man  who  is  forced  to 
accept  half-yards,  or  half-pounds,  or  half-bushels,  or  half-acres  for 
whole  ones,  is  no  more  injured  than  another  who  must  take  half 
for  whole  dollars — five  hundred  grains  of  coined  gold  or  their 
equivalent,  in.  discharge  of  a debt  for  one  thousand  grains. 

Among  others,  a well  known  bank  president  of  New  York 
thinks  we  have  not  currency  enough  to  do  the  large  business  of 
the  country.  I have  no  doubt  he  thinks  so,  but  he  mistakes  the 
nature  and  functions  of  money  and  the  source  of  its  efficiency — 
mistakes  volume  for  value.  If  the  currency  be  insufficient,  it  is 
because  prices  are  too  high — so  high  that  the  circulating  medium 

4 


26 


is  absorbed  before  the  needful  exchanges  have  been  completed. 
But  prices  are  just  what  a full  currency  has  made  them.  They 
follow  the  latter  as  faithfully  as  an  effect  does  its  cause,  or  a 
shadow  its  substance.  They  would  be  still  higher  if  money  were 
more  abundant,  while  the  latter  would  be  no  more  plentiful  after 
prices  had  risen.  The  many  who  believe  that  they  now  pay  more 
than  they  should  for  coal,  meat,  rents,  hotel  fare,  labor,  &c.,  are 
inconsistent  when  they  call  for  more  paper  currency.  Relief  can 
never  come  from  that  direction. 

There  are  those  who  deny  that  our  greenback-dollar  is  depre- 
ciated. If  they  will  ask  themselves  whether  a dollar  now  will 
purchase  as  much  of  the  products  of  labor,  or  go  as  far  in  build- 
ing a house,  or  in  the  support  of  a family,  as  it  did  before  the 
war,  they  will  see  their  mistake.  Every  commodity  may  be  used 
as  the  measure  of  every  other  commodity,  and  even  of  money 
itself,  and  when  any  one  will  exchange  for  less  of  every  other, 
when  no  special  causes  have  been  at  work,  the  inference  is  inevi- 
table that  that  one,  for  some  reason,  has  been  cheapened,  or  in 
other  words,  is  depreciated.  The  fact  that  the  dollar  of  to-day 
is  the  equivalent  of  only  twenty  grains  of  gold,  instead  of  twen- 
ty-three and  two-tenths,  ought  alone  to  be  satisfactory  evidence 
of  this. 

Too  often  the  persons  who  call  for  inflation  are  crafty  specula- 
tors who  want  the  property  they  have  bought  without  the  return 
of  an  equivalent,  and  desire  more  greenbacks  to  authorize  the 
transfer.  None  but  those  who  owe,  unless  by  indirection,  can 
derive  the  least  benefit  from  it.  Not  a shilling  is  added  to  the 
wealth  of  the  country.  Each  man’s  possessions  will  exchange 
for  no  more  of  those  of  others,  or  no  more  value,  than  before. 
Those  most  importunate  for  more  currency  would  not  be  helped 
by  any  number  of  new  dollars  which  should  be  worth  as  much 
as  those  already  in  existence.  If  the  latter  be  the  equivalent 
each  of  twenty  grains  of  gold,  and  they  can  obtain  others  worth 
but  twelve  grains,  each  “legal  tender  at  its  face,”  they  are  lifted 
out  of  the  mire,  perhaps  made  rich.  Ought  any  enactment 
which  grants  the  unrighteous  request  of  these  men  to  be  com- 
mended ? Instead  of  adding  in  this  way  to  our  already  super- 
abundant paper  money,  placing  in  the  way  new  obstacles  to  re- 
sumption, had  not  Congress  better  “ make  a clean  breast  of  it,”  re- 
duce the  weight  of  our  coins,  putting  twenty  grains  of  fine  gold 
into  the  legal  dollar  ? Then  paper  in  its  present  volume  would 
be  equal  to  gold.  Prices  would  not  be  disturbed;  there  would 


27 


be  no  necessity  for  contraction,  and  no  difficulty  in  immediate 
resumption.  Once  again  on  a specie  basis,  every  note  or  obliga- 
tion promising  to  pay  money,  would  probably  contain,  at  the  in- 
stance of  the  holder,  the  clause  “payable  in  United  States  coin 
of  the  present  weight  and  fineness,  or  its  equivalent.”  As  I un- 
derstand the  decision  of  our  courts,  this  promise  would  be  en- 
forced according  to  its  terms,  and  we  should  be  raised  from  our 
present  prostrate  and  humiliating  condition.  It  is  true,  this  de- 
gradation of  the  coin  is  disreputable;  nations  desirous  of  a good 
name  do  not  practice  it.  Nor  would  I recommend  it;  but  it  is 
no  worse  (though  the  wrong  may  be  more  apparent)  than  the  de- 
gradation of  the  medium  of  exchange  by  paper  issues.  To  go 
plunging  on  in  this  reckless  way  to  perdition  is  not  to  be  en- 
dured, if  escape  be  possible.  Whatever  in  our  desperation  we 
may  be  tempted  to  do,  it  is  to  be  hoped  that  we  shall  not  repeat 
the  greatest  mistake  of  the  war  by  passing  laws  which  impair 
the  obligation  of  contracts,  making  dollars  of  light  weight  legal 
tender  for  those  of  full  weight. 

Above  all  our  present  monetary  needs,  we  want  a fixed  meas- 
ure of  value;  one  in  which  business  men  can  place  confidence; 
one  which  will  make  the  dollar  of  to-morrow,  of  next  week  or 
next  year,  equal  to  that  of  to-day.  We  want  it  so  that  a trustee 
or  guardian  can  invest  without  loss  the  funds  in  his  keeping. 
Thus  protected,  the  people  can  enter  into  engag*ements  with  safe- 
ty, knowing  what  they  are  to  receive  and  how  much  to  pay. 
Congress  would  not  then  be  besieged  by  contending  and  inter- 
ested parties  asking  for  extraordinary  legislation. 

But  whatever  is  to  be  done  in  the  way  of  reform  should  be 
done  quickly.  At  this  moment,  the  secretary  of  the  treasury,  a 
subordinate  in  the  government,  on  his  own  responsibility,  and  in 
defiance  of  the  declared  opinion  of  a committee  of  the  Senate, 
is  exercising  the  highest  function  of  the  sovereign  power,  and 
daily  pouring  more  than  half  a million  into  the  swollen  flood 
of  legal  tenders.  Serenely  he  sits,  his  implements  by  his  side, 
chipping  off  the  yard-stick,  chiselling  bits  from  the  pound-weight, 
and  forcing  up  the  bottoms,  or  battering  down  the  rims  of  the 
bushel  and  gallon-measures.  When  his  present  work  is  done, 
and  the  forty-four  million  emitted,  he  will  have  added,  say,  five 
per  cent  to  the  currency.  It  is  to  be  feared  that  this  new  inflation 
will  be  permanent.  Should  it  be,  and  should  our  railroad  companies 
pay  all  their  debts  (now  amounting,  it  is  said,  to  two  thousand  mil- 
lion) in  government  notes,  and  should  they  not  pay  till  the  full 


28 


effects  of  the  inflation  are  felt,  they  alone  will  have  gained,  at 
the  expense  of  their  creditors,  one  hundred  million  of  dollars ! 
The  whole  (domestic)  indebtedness  of  the  country  is  estimated 
by  Senator  Fenton,  in  his  recent  able  speech  on  the  currency 
question,  at  twelve  thousand  million,  five  per  cent  of  which 
would  be  six  hundred  million  dollars  ! The  new  depreciation 
will  make  the  greenback-dollar  the  equivalent  of  nineteen  grains 
of  pure  gold,  and  nineteen  grains,  besides  alloy,  must  be  the 
weight  of  the  hypothetical  (not. proposed)  new  unit-coin. 

One  thing  is  certain.  If  there  be  any  truth  in  enonomic  science 
and  the  reasonings  of  this  essay,  specie  payments  can  never  be 
resumed  and  maintained  so  long  as  coin  is  at  a considerable  pre- 
mium, currency  redundant,  and  prices  at  their  present  level. 
Nor  can  any  legislation  or  any  scheme  correct  the  disparity 
which  does  not  contemplate  the  partial  withdrawal  of  circula- 
ting notes.  No  plan  yet  proposed  which  would  not  lead  to  this, 
either  immediately  or  as  a result,  can  be  effectual  till  the  demand 
for  value  in  the  currency  is  greater  than  now.  We  had  better 
face  the  difficulty  here  than  deceive  ourselves  longer  by  plausi- 
ble but  deceitful  schemes.  Suppose  the  United  States  treasury 
should  adopt  the  plan  often  proposed,  heap  up  gold  to  the  ex- 
tent, say,  of  four  hundred  million,  and  then  in  one  day  or  one 
week  redeem  the  whole  issue  of  greenbacks.  By  this  process, 
the  remaining  paper  (bank-notes)  has  been  raised  to  the  level  of 
gold,  prices  have  not  yet  been  disturbed,  and  resumption  is  effect- 
ed. But  mark  what  follows.  The  four  hundred  million  in  gold, 
worth,  say,  twelve  per  cent  premium,  have  taken  the  place  of 
the  same  amount  of  depreciated  greenbacks,  and  thus  added  to 
the  circulation  forty-eight  million.  To  that  extent  there  has  been, 
on  the  supposition,  an  inflation,  but  the  country  has  been  placed 
on  a specie  basis,  and  at  once  resumes  its  old  relations  to  other 
nations.  If  the  currency  were  redundant  before,  it  is  still  more 
so  now,  and  that  movement  at  once  begins  which  is  designed  to 
cure  it.  The  superabundant  gold,  undervalued  as  it  is,  flows  out- 
ward in  search  of  a better  market.  This  flow  continues  till  prices 
have  been  reduced,  and  the  currency  sufficiently  depleted.  No 
more  will  be  left  than  naturally  belongs  to  the  country,  and  no 
more  than  would  remain  had  legal-tenders  been  withdrawn  and 
cancelled,  one  by  one,  as  convenience  permitted.  Whatever  the 
method,  the  result  will  be  the  same,  if  it  be  effectual. 


The  Money  Problem  Again. 


I. 

Money — What  is  it?  What  gives  it  exchange- 
able value?  Prevalent  Errors. 

Money  is  the  exchangeable  equivalent  of  all  property  and 
services,  and  has  a double  function.  It  acts  as  a medium  of 
exchange,  and  as  a measure  of  value,  its  qualities  as  a measure 
fitting  it  for  use  as  a medium.  Any  substance  or  thing , passing 
from  hand  to  hand , which  is  capable  of  discharging  this  double 
function , ( whether  quite  perfectly  or  not ,)  and  has  been  set  apart 
for  that  service , with  the  full  consent  and  active  support  of  those 
who  need  its  assistance , is  money.  It  is  one  of  the  elemental 
forces  of  Political  Economy,  in  its  office  and  purpose  unlike  any 
other,  and  standing  by  itself.  Of  course  it  is  not  a commodity; 
does  not  become  merchandise  till  it  ceases  to  be  money;  is  not 
bought  and  sold  like  goods  in  the  market;  does  not  of  itself  sat- 
isfy any  physical  want;  is  not  designed  for  consumption,  and 
when  exercising  its  allotted  and  peculiar  function  does  not  like 
capital  reproduce  itself.  It  may  be  the  product  of  labor,  but 
labor  is  not  its  essential  constituent,  while  its  peculiar  endow- 
ments are  derived  from  another  source. 

A wonderful  instrument  or  device  is  money.  In  its  more  per- 
feet  form,  the  slow  growth  of  the  civilized  ages,  it  is  given  by  the 
buyer  and  taken  by  the  seller  because  it  facilitates  the  exchange 
of  products,  saving  much  time  and  labor.  It  is  a human  contri- 
vance (called,  not  happily,  a tool  by  Bouamy  Price)  employed  to 
diminish  the  friction,  waste  and  delay  attending  the  distribution 
of  wealth.  In  effect,  it  is  like  oil  applied  to  the  machinery  of 
trade.  It  saves  time,  power,  patience  and  traveling  expenses; 
increases  the  net  products  of  industry  and  commercial  enterprize, 
and  secures  exactness,  certainty  and  mutual  gain.  Through  its 
instrumentality,  the  heavy  charges  incident  to  the  transporta- 
tion and  transfer  of  goods— of  getting  them  from  the  producer 


6 


to  the  consumer — are  reduced  to  a minimum,  and  the  cumberous, 
devious  method  by  barter  superseded.  It  opens  an  improved 
way,  as  it  were,  to  the  exchange  market;  indirect,  it  may  be,  but 
more  quickly  traversed  and  vastly  easier  than  the  old  one — a way 
which  goes  by  a newly  found  cleft  through  the  mountain  instead 
of  over  it.  Without  its  agency,  our  present  elaborate  and  diver- 
sified industry,  with  its  divisions  of  employment  and  multiplied 
products  would  be  impossible.  More  and  more  as  invention  and 
the  mechanic  arts  are  introduced  and  perfected  do  its  benefits 
become  apparent. 

Money  when  analyzed,  or  viewed  as  money  and  nothing  more, 
may  be  regarded  as  a receipt,  acknowledgment  or  voucher — 
a certificate  of  admitted  authority — the  denomination  indicat- 
ing the  amount.  It  signifies  that  the  bearer  has  parted  with  his 
earnings  or  savings,  and  is  entitled  from  those  in  want  of  it  to  as 
much  in  return.  It  is  an  order  for  goods  or  other  property,  or 
for  labor  and  services  which  none  desiring  an  exchange  will  re- 
fuse. He  who  gets  it  obtains  the  equivalent  in  purchasing  power 
of  whatever  he  may  have  relinquished.  If  a man  have  wheat 
and  would  exchange  it  for  cloth,  he  sells  it  for  money  as  the 
readiest,  most  economical  way  of  obtaining  the  cloth.  He  does 
not  want  the  medium  except  as  the  most  effective  means  of  get- 
ting something  else,  and  would  not  take  it  but  for  this  instru- 
mental use,  as  it  would  lead  him  away  from  instead  of  toward 
his  object.  On  its  surrender  in  payment  for  cloth,  its  mission,  so 
far  as  he  is  concerned,  is  ended.  It  has  helped  him  to  get  the 
desired  equivalent  of  his  cloth,  and  now  his  claim  is  satisfied. 
The  draft  goes  into  new  hands  to  be  held  for  a similar  service. 
To  the  parties  in  a bargain,  it  serves  as  a light-running  vehicle 
for  the  transfer  of  commodities.  Or  it  may  be  likened  to  a me- 
diator and  go-between,  having  a lifting  or  tractive  power  equal 
to  its  exchange-value,  and  sufficient  for  any  emergency.  Because 
it  does  much  excellent  work  cheaply  and  with  dispatch,  it  de- 
serves the  name  of  a labor-saving  instrument.  Except  as  an 
implement  reserved  for  a single  indispensable  service  (in  which 
service  it  changes  hands),  it  has  not  the  smallest  attractions  ex- 
cept to  the  curiosity-hunter  and  the  miser,  and  can  be  turned  to 
no  enconomic  or  intelligible  use.  The  charms  with  which  the 
popular  mind  has  invested  it  are  wholly  due  to  its  association 
with  unnumbered  forms  of  material  good.  Hoarded,  it  is  no 
more  useful,  perhaps  no  more  ornamental,  than  an  assortment  of 


7 


yard-sticks  or  gallon-measures.  Its  undoubted  benefits,  the  fruits 
of  its  friendly  offices,  are  not  secured  till  the  owner  has  parted 
with  it. 

Were  the  rogues  (including  counterfeiters)  all  throttled,  any 
thing  easily  handled  might  become  money — shells,  stones,  chips, 
bits  of  leather  or  paper,  etc.  Whatever  its  material  or  form,  its 
circulation,  as  a medium  of  trade,  will  be  found,  when  the  case  is 
critically  examined,  to  depend  solely  on  consent — a mutual  agree- 
ment, tacit  if  not  formal,  among  the  holders  of  property  and  ser- 
vices to  accept  it  as  the  money  of  the  country.  Consent  on  the 
part  of  giver  and  receiver  confers  the  special  endowment  which 
distinguishes  it  from  everything  else.  Having  this  endowment 
or  quality,  chips  or  rags  may  become  money.  Without  it  gold 
and  silver  coins  are  mere  merchandise.  Sustained  by  consent 
and  general  acceptance,  money  cannot  fail.  Cognizant  of  this 
fact  and  confident  of  safety,  every  business  man  unhesitatingly 
receives  it,  knowing  that  by  doing  so  he  becomes  a creditor  in 
the  market — acquires  a general  purchasing  power  equal  to  any 
he  may  have  relinquished,  and  far  more  available.  With  it,  he 
can  command,  in  definite  amount,  any  thing  for  sale  which  fancy 
or  necessity  may  prompt  him  to  buy.  So  conspicuous  are  its  ad- 
vantages that  the  merchant  lays  hold  of  the  first  chance  to  ex- 
change for  it  any  part  or  the  whole  of  his  stock  in  trade,  satisfied 
that  he  obtains  that  which  will  not  only  replenish  his  stores,  but 
yield  a surplus  called  profit.  The  conventional  medium  does  for 
him  and  his  business  all  which  it  is  possible  for  money  to  do.  He 
wanted  exchangeable  value,  in  the  most  current  form,  which 
would  not  come  to  naught  at  a critical  time,  and  this  he  has  got. 
For  a special  service,  he  sought  an  instrument  the  most  effective 
known — one  that  would  do  its  work  perfectly  without  wear  or 
waste,  and  has  obtained  it.  What  more  can  he  ask  ? For  his  use 
it  is  not  important  what  its  material,  its  form  or  color;  whether 
it  be  the  product  of  labor;  whether  it  be  the  substantial,  as  well 
as  exchangeable  equivalent  of  his  goods  or  wares;  whether  or 
not  the  coin  may  be  obtained  for  it,  unless,  indeed,  that  fact 
should  make  it  more  valuable  as  merchandise  than  as  currency. 
He  may  not  know  who  the  issuer  may  be,  or  whether  solvent; 
whose  seal  or  promise  it  may  bear,  whose  faith  or  credit  pledge, 
or  what  the  sovereign  power  may  have  said  or  done.  If  it  have 
a known  value  in  exchange,  and  be  every  where  current,  no  mat- 
ter whether  it  be  hard  or  soft,  yellow,  white  or  green,  it  is  the 


8 


thing  he  needs.  As  an  instrument  or  medium,  as  a receipt,  order 
or  accepted  draft,  the  wealth  of  a continent  “ behind  it  ” and  up- 
holding it  would  make  it  no  better.  With  the  strength  derived 
from  consent  alone,  it  has  all  the  lifting  and  tractive  power  re- 
quired for  the  easy  and  rapid  interchange  of  commodities  and 
services,  and  any  new  or  additional  force  (were  it  possible  to  im- 
part it)  could  not  be  utilized.  Erelong,  no  doubt,  we  shall  be 
able  to  throw  off  the  delusion  that  a currency  which  meets  all 
the  requirements  of  both  buyers  and  sellers — of  the  producers,  dis- 
tributors and  consumers  of  wealth — needs  adventitious  support, 
or  bolstering  of  any  kind. 

I have  been  writing  of  money  in  its  simplest,  most  elementary 
form,  chiefly  of  money  as  a medium  of  exchange,  divested  of 
non-essentials,  and  having  no  intrinsic  value.  When  stripped  of 
everything  not  a needful  part  of  it,  and  the  nucleus  only  remains, 
it  will  be  seen  that  consent — consent  of  those  who  give  and  those 
who  take — is  its  elemental  principle,  the  source  of  the  confidence 
it  inspires,  and  its  usefulness  as  an  economic  force.  An  in- 
strument thus  endowed  has  marvelous  power,  and  is  fitted  to 
move  the  world  of  wealth  and  industry.  Without  consent,  it  is 
impotent  and  worthless.  Withdraw  it  when  once  given,  and 
the  “ best  currency  in  the  world,”  however  fortified,  loses  its  pe- 
culiar virtues,  and  ceases  to  be  money.  Deprived  of  its  support, 
specie  itself  could  not  discharge  its  customary  office.  It  would 
be  merchandise  requiring  money  for  its  transfer. 

I have  endeavored  to  show  that  money  derives  the  special 
quality  which  fits  it  to  act  as  a medium  of  exchange  from  con- 
sent. But  the  world  takes  a different  view.  Without  the  small- 
est show  of  reason,  Prof.  Price  affirms  that  “ coin,  metallic  coin, 
alone  is  true  money,  and  nothing  else  is.”  Others  suppose  that, 
in  this  matter,  the  government  is  all-sufficient,  the  fountain  of 
power,  and  persuasive  beyond  control.  “ That  is  money,”  says 
one,  “which  the  law  declares  to  be  so.”  But  suppose  the  people, 
usually  submissive,  in  a preemptory  way  dissent.  The  law  is 
mighty,  I admit,  but  it  cannot  compel  one  man  to  sell  to  another 
his  horse,  merchandise  or  labor  for  some  specific  thing  which  the 
latter  does  not  want  or  prefers  not  to  take.  So  said  sturdy  J acob 
Collaraer,  in  the  United  States  Senate,  when  the  legal  tender 
iniquity  was  up  for  discussion.  In  this  matter,  if  constraint  be 
attempted,  the  owner  of  property  will  circumvent  the  statute  by 
having  nothing  to  sell.  He  may  submit  to  robbery  under  pro- 


9 


test,  but  will  not  be  a party  in  a bargain  which  proposes  this  as 
an  end.  A sufficient  penalty,  in  a particular  case,  if  the  person 
be  timid,  may  secure  conformity,  but  the  needed  consent  (which 
is  an  act  of  volition),  and  the  confidence  flowing  from  it  cannot 
be  forced.  This  fact  the  statesmen  (so-called)  of  our  colonial, 
Revolutionary  and  more  recent  history  were  slow  to  learn,  and 
never  fully  understood.  During  the  war  of  the  Rebellion,  Con- 
gress attempted  many  impossible  things,  but  it  was  not  foolish 
or  absurd  enough  to  try,  perforce,  to  make  its  tender-notes  the 
common  medium  of  trade.  Dishonestly,  it  set  aside  the  old  stand- 
ard, made  them  the  lawful  measure  of  value,  compelled  creditors 
to  receive  them  in  satisfaction  of  their  claims,  and  inflicted  un- 
measured wrong  in  that  direction;  but  to  this  day  every  man  is 
free  to  take  or  refuse  them  in  exchange  for  his  houses,  lands, 
goods  or  services.  The  monstrous  wickedness  of  the  bill  as  a 
whole  leads  one  to  fear  that  any  forbearance  on  a minor  point 
was  not  due  to  an  unwillingness  to  do  evil,  but  to  practical  diffi- 
culties felt  to  be  insurmountable.  When,  at  a later  period,  our 
law-givers  essayed  to  limit  the  depreciation  of  greenbacks  by 
regulating  the  traffic  in  gold,  the  first  words  of  indignation  were 
drowned  in  a general  guffaw,  and  the  act  was  incontinently  re- 
pealed. 

It  is  idle  to  contend  with  Mr.  Price  that  “ coin  alone  is,”  or 
with  others  that  the  greenback  is  not  “ true  money.”  The  two 
exercise  the  same  function,  do  the  same  work  with  equal  dis- 
patch, and  expedite  trade  in  the  same  way.  They  differ  only  in 
matters  which  are  not  essential,  and  which  do  not  relate  to  their 
office.  The  differences  are  made  sufficiently  prominent  when  one 
is  called  hard,  the  other  soft,  one  metallic  the  otKer  paper  money, 
etc.  In  the  genuine  sense  both  are  money,  as  the  language  which 
usage  sanctions  implies.  They  are  varieties  of  the  same  thing, 
fundamentally  and  essentially  one.  Of  two  dwellings,  one  of 
brick  the  other  of  wood,  one  yellow  the  other  green,  it  is  not  the 
custom  to  deny  that  both  are  houses.  I do  not  think  it  possible 
to  frame  a just  definition  of  money  which  will  include  coin  and 
exclude  the  greenback.  If  the  latter  be  not  money  pray  what  is 
it  ? Have  we  been  living  (most  of  the  time  very  fast)  for  fifteen 
years  almost  without  money,  a feat  hitherto  thought  impossible  ? 
During  this  time  the  products  of  industry  and  property  of  every 
kind,  to  an  enormous  extent,  have  been  bought  and  sold,  and  the 
needful  payments  made.  What  name  shall  be  given  to  the  com- 

3 


10 


mon  medium  of  trade  which  has  been  instrumental  in  this  work  ? 
Will  you  follow  certain  precedents,  and  call  it  currency  ? Then 
please  say  what  is  meant  by  currency,  and  so  define  the  term  as 
to  exclude  coin  and  include  the  legal-tender,  and  all  those  de- 
vices, exercising  other  offices,  which  are  used  as  substitutes  for 
money,  like  checks,  drafts,  and  bills  of  exchange.  The  latter, 
though  conveniently  called  cash,  or  cash  funds,  cannot  properly 
be  embraced  in  the  same  category  as  the  greenback.  They  do  not 
“ pass  from  hand  to  hand,”  do  not  circulate , but  go  directly  from 
the  drawer  to  the  drawee  for  payment.  They  are  never  the  stand- 
ard of  value,  but  suppose  a standard  by  which  they  are  them- 
selves measured. — In  this  paper  I have  usually  employed  the  term 
currency  as  synonymous  with  that  of  money,  in  accordance  with 
the  best  usage. 

The  legal  tender  part  of  the  law  authorizing  United  States 
currency  notes  gave  no  strength  to  the  greenback,  as  an  instru- 
ment of  exchange.  It  did  not,  in  the  way  expected,  prevent  de- 
preciation or  delay  it.  As  a medium,  the  notes  needed  no  spec- 
ial legislative  encouragement,  and  especially  no  coercive  appli- 
ances. Buoyed  up  by  the  circumstances  of  the  time,  and  a 
passionate  longing  for  innovation,  they  had  sufficient  vigor 
(popularity)  of  their  own.  The  banks  were  suspicious  for  a short 
period,  perhaps  because  their  own  circulation  would  be  curtailed, 
but  business-men  and  the  people  at  large  hailed  them  with  en- 
thusiasm, and,  in  exchange  for  their  products  and  labor,  accepted 
them  with  a welcome,  as  they  would  have  done  with  inferior  in- 
ducements. Said  one,  brimming  with  excitement,  “even  the 
children  cry  for  them.”  Before  there  was  much  depreciation, 
and  before  the  tender  provision  had  been  generally  thought  of,  or 
could  have  had  any  practical  effect,  they  had  obtained  a firm 
foot  hold.  In  more  ordinary  times,  when  patriotic  motives  do 
not  abound,  and  public  opinion  may  be  safely  ignored,  it  is 
not  difficult,  under  favorable  circumstances,  to  obtain  the  ac- 
ceptance, as  a medium  of  exchange,  of  almost  any  kind  of  money 
which  has  a plausible  exterior  and  promises  energetically.  The 
people  are  naturally  disposed  to  be  easy  and  courteous  in  this 
matter,  and  will  receive  from  their  customers,  employers  and 
friends  anything  by  which  the  end  sought — exchange  of  commo- 
dities and  services — may  be  attained,  without  personal  risk  or 
loss.  If  a man  have  shoes  and  want  hats,  he  will  take  in  pay- 
ment whatever  the  hatter  will  take*  and  never  hesitates  when. 


11 


assured  of  that.  All  others  in  like  circumstances  will  do  the 
same.  Consent  then,  to  whatsoever  it  may  attach  itself,  will 
make  a proposed  medium  good  money  in  all  commercial  inter- 
course between  the  consenting  parties.  Nor  would  it  be  neces- 
sary to  call  on  the  government  for  any  assistance  except  to  give 
the  sanction  of  law  to  the  customs  and  usages  of  merchants  and 
business-men.  Certain  superserviceable  legislators  may  feel  cha- 
grin that  the  people  should  be  able  to  help  themselves  in  a mat- 
ter they  have  been  pronounced  dependent  on  the  bounty  of  the 
government,  and  in  their  private  capacity  helpless;  but  those 
who  desire  to  live  honestly  by  their  own  efforts  should  rejoice. 

A government  with  large  receipts  and  expenditures  may,  with- 
out the  use  of  law  or  the  least  constraint,  exercise  (sometimes 
legitimately)  a great  if  not  controlling  influence  over  the  curren- 
cy. Paper  which  it  issues,  and  makes  receivable  for  public  dues, 
creditors  will  cheerfully  accept  to  a limited  extent,  though  not 
redeemable  in  coin,  and  never  intended  to  be  paid  in  cash.  It 
passes  through  several  hands  perhaps,  and  is  then  received  into 
the  treasury  to  be  again  disbursed.  It  thus  obtains  a sure  circu- 
lation, more  or  less  general,  and  does  not  depreciate  as  compared 
with  the  money  of  the  country,  unless  supplied  in  excess — in  ex- 
cess of  the  wants  of  those  who  make  payments  to  the  govern- 
ment. Of  this  kind  were  the  sixty  million  United  States  demand 
notes,  after  the  government  failed  to  redeem  them  in  specie,  in 
the  beginning  of  the  late  war.  They  Were  receivable  for  cus- 
toms, and  were  at  all  times  as  good  as  gold.  Those  that  remained 
in  the  hands  of  the  people  maintained  their  ground  when  green- 
backs were  greatly  depressed,  at  one  time  worth  but  thirty-five 
per  cent,  of  their  face.  Banks  of  discount  and  deposit,  of  good 
reputation,  are  the  centres  of  a similar  influence,  and  can,  by 
concerted  action,  exert  great  power.  Usually,  whatever  they 
are  willing  to  lend  borrowers  must  accept,  while  the  debtors  are 
glad  to  get  any  medium  which  will  pay  their  notes.  Doubtless, 
each  institution  of  great  influence  and  large  capital  might  circu- 
late, at  par  value,  a limited  amount  of  paper  bearing  the  words 
“ Receivable  on  deposit,  and  for  all  dues  to  this  Bank,”  without 
the  promise  of  any  kind  of  redemption.  As  nearly  every  business 
man  keeps  his  cash  funds  in  some  bank,  and  makes  and  receives 
payments  through  it,  it  would  be  inconvenient  for  him  to  refuse 
bank-money,  and  unsafe  should  he  expect  favors.  What  mer- 
chants, manufacturers,  contractors,  etc.,  did  not  decline  those 


12 


with  whom  they  had  business  relations,  such  as  producers,  em- 
ployees, etc.,  would  be  slow  to  reject.  To  avoid  depreciation, 
however,  it  would  be  necessary  to  observe  in  strictness  the  single 
or  exclusive  law  which  determines  the  value  of  inconvertible 
paper — the  law  of  limitation.  The  supply  must  not  exceed  the 
legitimate  demand. 

So  commanding  is  the  position  of  the  banks  that  a few  score 
of  the  largest  and  strongest  could,  doubtless,  by  united  action, 
if  government  would  but  keep  its  hands  off,  bring  into  general 
use  almost  any  kind  of  money  suitable  for  its  work,  depending 
for  success  solely  on  those  moral  influences  which  induce  consent. 
Would  the  banks  of  New  England  and  New  York,  most  of  them 
national  institutions,  give  up  their  present  charters,  and  organize 
anew  on  a gold  basis,  under  the  law  enacted  for  California  and 
the  neighboring  states,  issuing  notes  payable  in  specie  only,  they 
could  initiate  a resumption-movement,  as  they  did  after  the  war 
of  1812,  and  again  in  1837,  ’39  and  ’57,  which  would,  at  length, 
as  then,  extend  to  the  reluctant  (or  at  least  hesitating)  states 
farther  west  and  south.  Should  the  inflationists  of  Pennsylvania, 
Ohio,  the  Mississippi  Valley,  etc.,  get  control  of  the  government, 
and  attempt  to  reduce  their  schemes  to  practice,  the  friends  of 
a sound  and  honest  currency  may  be  compelled,  in  self  defence, 
and  by  a sense  of  imperative  duty,  wherever  they  have  the  power, 
to  adopt  the  measure  indicated,  and,  at  a favorable  time,  carry 
it  forward  to  success.  To  those  who  would  save  the  nation  from 
dishonor  and  the  direst  calamities,  it  would,  in  truth,  be  the  only 
course  left.  I am  not  insensible  to  some  possible  and  practical 
difficulties  in  the  way  of  cutting  loose  from  the  banking  system 
of  the  country,  and  substituting  convertible  gold  notes  for  depre- 
ciated bank  paper,  but  they  might,  I think,  be  overcome  by 
moderation  and  good  judgment,  provided  always  that  the  gov- 
ernment shall  place  no  fresh  obstacles  in  the  way  of  reformatory 
efforts. 

Those  who  contend  that  the  compulsory  clause  of  the  legal 
tender  act  was  required  to  make  greenbacks  current — current  as 
medium  of  exchange — know  little  of  history  and  the  common- 
est facts.  Everywhere,  throughout  the  reign  of  unstable  or  de- 
preciating paper  money,  it  has  proved  far  easier  to  assure  than 
hinder  its  circulation — to  fasten  it  upon  a people  than  loosen  its 
ever  tightening  grasp.  Like  certain  reptiles,  it  has  the  power  of 
fascination,  and  a vitality  which  is  as  wonderful  as  pernicious. 


Baring  the  forty  years  which  followed  1710,  Comiecticut  found 
it  easy  enough — down  grade  all  the  way — to  put  out  and  keep 
in  use  its  steadily  declining  “ bills  of  credit  ” (circulating  notes) 
without  the  support  (except  for  a few  months)  of  any  tender-law. 
There  were  attempts  to  force  the  settlement  of  old  contracts 
with  specie,  but  these  were  uncommon  and  usually  unrenumera- 
tive.  The  “ General  Court  ” favored  the  debtors,  and  display- 
ed no  little  ingenuity  in  devising  indirect  ways  for  escape.  The 
bills  were  equal  in  exchangeable  value  to  the  “ legal-tenders  ” 
of  the  other  New  England  colonies  in  which  they  circulated  to 
a limited  extent.  For  colony  taxes*  they  were  receivable  at  a 
premium  of  live  per  cent.,  and  hard  money  was  unknown  except 
as  merchandise.  Notwithstanding  the  confusion  and  disaster 
they  had  introduced,  so  popular  were  they,  even  when  worth  but 
one  sixth  of  their  first  value,  that  decisive  action  on  the  part  of 
the  British  government  was  required  to  stay  the  evil.  This  ac- 
tion was  deemed  wantonly  oppressive,  and  brought  unaffected 
grief  to  a large  portion  of  the  colonists.  The  first  opportunity 
to  escape  from  this  particular  thraldom  occurred  in  1775,  at  the 
outbreak  of  the  war,  and  was  assiduously  improved.  A season 
of  riotous  liberty,  then  a surfeit,  and  lastly,  a calamitous  break- 
down followed.  Then  came  the  Constitution  with  its  prohibit 
tions,  and  a partial  immunity  from  an  intolerable  nuisance  for 
seventy-two  years;  then  more  rioting,  and  the  grand  final  wreck 
in  the  Supreme  Court  of  the  United  States  in  1871. 

It  is  unreasonable  to  suppose  that  the  government,  with  the 
patronage  and  influence  connected  with  the  receipt  and  expendi- 
ture of  one  thousand  million  dollars  annually,  upheld  as  it  was  by 
the  banks,  the  wealth  of  the  “loyal  states,”  the  courts  and  a large 
majority  of  the  people,  and  commanding  a million  armed  men 
impatient  to  do  its  bidding,  needed  the  tender-provision  to  makp 
its  notes  current.  As  a circulating  medium,  and  against  all  the 
supports  and  persuasives,  moral  and  physical,  which  the  circum- 
stances supplied,  a failure  would  have  been  impossible,  certainly 
while  the  war  lasted.  Had  there  been  difficulty,  the  rapid  de- 
preciation of  the  greenback,  (which  shrewd  men  anticipated,) 
and  the  prompt  disappearance  or  displacement  of  other  money 
more  valuable  than  itself,  both  caused  by  excessive  emissions, 
would  have  left  the  field  in  possession  of  the  government.  As 
strange  as  it  may  seem  to  the  unreflecting,  there  is  nothing  so 
certain  to  fix  a currency,  momentarily,  in  the  good  opinion,  if 


14 


not  the  affections  of  a people  as  its  steadily  declining  value;  and 
the  nearer  it  approaches  worthlessness,  without  extinction,  the 
more  popular,  with  many,  it  becomes.  The  reason  of  this  is 
found  in  the  fact  that  the  very  large  class  of  money-debtors  pay 
easiest,  that  is,  with  the  least  sacrifice  of  toil  and  sweat,  when 
money  has  least  value.  All  however  which  is  gained  by  one 
class  in  this  way  is  lost  by  another. 

As  the  constitution  is  now  interpreted,  Congress  has  the  au- 
thority (in  certain  emergencies,  if  not  at  all  times)  to  make  the 
greenback  or  any  thing  else  legal-tender,  and  to  compel  the  peo- 
ple, whatever  the  sacrifice,  to  receive  it  for  what  it  claims  to  be 
in  satisfaction  of  debts.  It  can  put  forth  a scant  and  contempt- 
able  measure  of  value,  and  force  creditors  to  abide  by  its  decisions 
whatever  the  injustice;  but  this  is  the  extent  of  its  power  for 
mischief.  It  might  do  more,  and  prescribe  the  quantity  of  goods 
which  shall  be  given  for  the  greenback  dollar,  but  the  end  sought 
in  this  way  has  in  practice  been  found  unattainable.  The  im- 
mutable law  which  governs  the  proportion  in  which  one  com- 
modity shall  exchange  for  another — the  law  of  equivalence — has 
proved  too  much  for  it.  Desirable  it  undoubtedly  is  that  the 
common  medium  of  exchange,  and  the  measure  of  value  used  in 
the  settlement  of  contracts  should  be  the  same,  but  it  is  not  in- 
dispensable. Had  the  tender-provision  of  the  statute  of  Febru- 
ary, 1862,  been  omitted,  government  notes  would,  no  doubt, 
notwithstanding  the  omission,  have  become  the  money  of  the 
country.  Nor  would  creditors  have  refused  to  receive  them  till 
over-issue  had  much  impaired  their  value,  or,  perhaps,  till  the 
close  of  the  war,  when  undoubtedly  the  cheat  would  have  been 
discovered,  and  an  effort  been  made  to  right  the  wrong.  This 
effort,  persisted  in,  must  have  brought  into  use  for  a special  pur- 
pose (the  settlement  of  old  contracts)  a large  amount  of  the  only 
lawful  or  legal  tender  money  among  us,  to  wit,  coin.  We  should 
then  have  had,  as  now,  two  kinds  of  money  in  circulation;  one 
of  metal  for  the  payment  of  private  debts  and  custom  house  dues, 
the  other  of  paper  for  the  accommodation  of  trade,  and  all  cash 
transactions.  The  first  would  be  the  standard  of  value  by  which 
obligations  contracted  on  a specie  basis  would  be  measured  and 
adjusted.  The  other  would  be  the  common  medium  of  exchange 
in  which  accounts  were  kept.  Under  these  conditions  the  busi- 
ness of  the  country  might  be  transacted,  and  something  like  jus- 
tice done;  but  the  inconveniencies  of  a complex  system  thus 


15 


extended  would  be  so  great,  and  the  position  of  the  government 
so  embarrassing,  not  to  say  disgraceful,  that  it  would  be  con- 
strained to  withdraw  a portion  of  its  notes,  and  so  restore  the 
value  of  the  remainder.  The  apprehension  of  untoward  results 
and  deserved  reprobation  would  doubtless  do  much  to  deter 
from  wrong-doing  (inflation). 

In  estimating  the  effect  of  the  compulsory  part  of  the  law  giv- 
ing birth  to  the  greenback,  it  is  important  to  remember  that 
nearly  every  well-informed  man,  who  kept  his  head  cool,  consid- 
ered the  law  unconstitutional  and  without  legal  force.  Conse- 
quently, it  could  not  have  had  the  eflect  claimed  by  its  defend- 
ers— the  effect  of  securing  the  acceptance  of  the  greenback  as  a 
circulating  medium.  Not  till  after  the  war,  when  interested 
parties  had  had  time  to  count  the  money  which  the  law  gave  to 
one  party  and  took  from  another,  that  different  views,  owing,  I 
suppose,  to  clearer  vision,  became  common. 

Continental  paper  money,  though  confessedly  issued  without 
any  rightful  authority  and  binding  nobody,  was  current  every- 
where, and  would  buy  anything,  even  when  worth  no  more 
than  one  per  cent  of  its  face.  It  was  in  universal  use,  not  only 
as  a medium  of  exchange,  but  for  a long  time,  as  a measure  of 
value.  Nor  did  state  legislation  giving  it  a legal  status,  and 
declaring  it  “good  in  all  payments”  make  it  better  or  delay  its 
downfall.  Consent,  not  the  supposed  solvency  of  the  promisors 
and  their  backers,  or  the  hope  of  ultimate  redemption,  was  the 
source  of  all  the  strength  it  ever  had,  while  its  increasing  weak- 
ness grew  out  of  over-issues.  The  state  banks,  at  different  peri- 
ods, say  in  1814,  ’37, ’39,  ’57  and  ’61,  suspended  specie  payment, 
but  their  depreciated  notes  continued  to  be  the  common  currency, 
and  as  a medium  of  exchange  were  universally  accepted.  Bill- 
holders,  when  assured  of  soundness,  rarely  attempted  to  enforce 
their  legal  rights,  but  waited  patiently  and  confidently  for  vol- 
untary resumption  under  the  pressure  of  law.  The  same  result 
would  have  followed  the  late  war  had  not  the  government  pre- 
vented it  by  the  tender-law  and  other  legislation. 

No  doubt  the  legal  tender-provision,  when  a currency  is  much 
depreciated,  will  help  indirectly  to  keep  it  in  circulation  and 
sustain  its  value.  It  will  do  so  by  multiplying  the  uses,  and  ex- 
tending the  demand  for  it.  The  domestic  debts  of  a people  are 
always,  in  the  aggregate,  very  large,  and  no  small  amount  is  re- 
quired for  their  payment.  The  legal  measure  of  value,  though 


16 


notoriously  false  and  fraudulent,  creditors  will  (because  they 
must)  accept,  and  whatever  they  receive  the  indebted  class, 
seeking  ever  the  cheapest  means  of  payment,  is  ready  to  take. 
The  larger  sums  are  of  course  most  conveniently  paid  by  checks, 
the  smaller  in  money.  The  party  which  is  wronged  in  this  mat- 
ter, and  would  be  righted,  is  stripped  of  power;  while  a larger 
party,  having  great  influence,  profits  by  injustice,  and  too  often 
wishes  no  reform.  Those  whose  credits  and  debits  are  nearly 
equal,  or  who  use  money  only  as  a medium  of  exchange,  work- 
ing, buying  and  selling  for  cash  only,  are,  not  unfrequently,  in- 
different spectators.  The  experience  of  the  last  three  years  should 
teach  the  unbelieving  that  prosperity  which  has  no  better  founda- 
tion than  selfishness  and  fraud  is  delusive,  and  that  private  gain, 
in  the  long  run,  is  best  secured  by  measures  which  promote  fair 
dealing  and  the  good  of  all. 

As  a medium  of  exchange,  it  is  desirable  that  money  should 
have  a stable  value,  but  not  quite  indispensable.  It  may  fluc- 
tuate moderately  without  becoming  unfit  for  use,  because  the 
change  while  in  the  hands  of  a single  individual  would  be  small 
and  insignificant.  If  the  fluctuations  were  more'  considerable, 
but  all  in  one  direction,  and  could  be  foreseen,  the  prices  of  com- 
modities would  be  adjusted  to  the  expected  alteration,  so  that 
the  receiver  and  holder  of  money  would  risk  little.  On  the  con- 
trary, should  the  changes  be  great,  sudden  and  capricious,  so 
that  no  estimate  could  be  formed  of  their  extent,  direction  or 
time  of  occurrence,  every  exchange  of  goods  or  property  for 
dollars  would  be  a speculation,  a leap  in  the  dark,  the  end  of 
which  no  man  could  divine.  Before  a reinvestment  could  be 
conveniently  made,  the  temporary  holder  of  a treacherous  me- 
dium might  be  ruined.  When  this  uncertainty  exists,  caused 
by  money  which  is  not  a reasonably  stable  measure  of  value  as 
well  as  an  instrument  of  exchange,  honest,  prudent  men,  those 
who  desire  to  earn  what  they  get  and  get  all  they  earn,  are  greatly 
perplexed.  If.  they  have  goods  for  sale  they  sell  for  cash,  and 
are  in  haste  to  buy  again  before  cash  has  lost  its  purchasing 
power.  Cautious  and  conservative,  they  pursued  this  course 
during  the  paper  deluge  of  the  late  war,  and  more  than  others 
were  prepared  for  the  financial  cyclone  of  September,  1873,  and 
the  day  of  judgment  which  is  following  it.  But  times  of  doubt 
and  surprises  delight  the  adventurer  in  business.  Of  large  faith, 
courageous  and  ambitious,  he  fears  not  the  risks  which  others 


17 


dread.  Having  perhaps  little  to  lose,  he  braves  the  perils  of  un- 
known seas,  expecting  propitious  gales  and  a prosperous  voyage, 
the  rich  returns  of  which  will  be  exclusively  his,  the  losses  prob- 
ably not.  He  buys  largely,  and  as  every  movement  of  the  cur- 
rency attractive  to  speculators  is  toward  expansion  and  higher 
prices,  he  moves  on  confidently  and  grandly,  borne  up  by  inflated 
values,  till  present  wealth  is  achieved — or  his  notes  become  due. 
When  prices  are  capricious  and  luck  determines  destiny;  when 
labor  is  uncertain  of  reward,  and  riches  have  no  sure  connection 
with  industry  and  economy;  when  each  moneyed  transaction  is 
a venture,  and  the  wisest  precautions  may  prove  fruitless;  when 
the  legal  defences  which  hedge  about  one’s  savings  are  weak- 
ened; then  is  the  speculator’s  opportunity.  Finding  the  general 
hold  on  property  loosened,  and  much  of  it  shifting  and  drifting 
about  helplessly,  no  claimant  having  a very  clear  right  of  owner- 
ship, he  throws  himself  audaciously  among  the  conflicting  forces, 
hoping  to  bear  off  something.  Till  the  “ panic  ’’came — which 
measurably  cleared  up  titles  and  determined  ownership — his  suc- 
cess was  sometimes  marvelous. 

In  illustration  of  the  principles  which  govern  an  inconvertible 
currency  having  no  intrinsic  value,  suppose  Congress,  rioting  in 
unrestricted  freedom  under  the  authority  of  the  Supreme  Court 
of  the  United  States,  should  procure,  without  cost,  a great  quan- 
tity of  paper  of  the  paste-board  variety,  cut  it  into  strips  having 
a total  length  of  ten  thousand  miles,  and  present  it  to  the  coun- 
try as  a new  currency,  withdrawing  the  old.  Its  universal  ac- 
ceptance would  convert  it  into  money,  give  it  exchangeable  value, 
and  qualifiy  it  to  act  as  the  common  medium  of  exchange  and 
measure  of  value.  It  would  be  money  without  the  usual  accre- 
tions or  accompaniments — money  without  the  promise  to  pay 
other  money,  and  without  intrinsic  worth.  As  no  more  (by  the 
supposition)  could  be  had,  its  total  value,  called  forth  by  the 
aggregated  demands  of  business,  and  limited  by  these  demands, 
would  necessarily  be  “ equal  to  the  wants  of  trade,”  and  suffi- 
cient, without  excess,  for  all  the  moneyed  transactions  of  the 
nation.  Nor  would  it  be  more  efficient  were  the  quantity  of 
paper  double,  or  less  so  were  it  but  half  as  much.  Its  adequacy 
would  in  no  way  be  dependent  on  its  volume  (length).  It  would 
be  needful,  however,  in  order  that  it  might  be  employed  as  a 
counter  (medium)  in  commerce,  to  divide  the  strips  into  parts,  as 
the  other  counters,  the  yard-stick  for  example,  are  divided.  The 


18 


divisions  might  correspond  with  those  of  the  foot  rule,  the 
unit  being  exactly  one  inch.  The  units  might  be  detached,  or 
united  in  groups  of  two  or  more,  and  the  fragments  numbered, 
the  number  indicating  the  denomination  or  comparative  value, 
No.  1 denoting  unity  or  one  inch,  No.  2,  two  inches,  etc.  So 
soon  as  experience,  or  the  competition  of  holders  feeling  their 
way  under  new  conditions,  had  determined  the  proportions  in 
which  the  new  money  should  be  given  for  the  products  of  indus- 
try, and  trade  had  been  adjusted  to  its  divisions  or  denomina- 
tions, the  value  of  commodities  could  be  measured,  somewhat  as 
cloth  is,  by  a strip  of  paper  giving  their  contents  in  inches  and 
tenths.  Each  of  the  inch-fragments  would  exchange  for  a defi- 
nite amount  of  goods  and  labor — an  amount  determined  by  the 
rule  of  proportion.  In  other  words,  the  value  or  purchasing 
power  of  each  when  compared  with  that  of  the  whole,  would  be 
as  one  inch  to  ten  thousand  miles,  or  one  inch  to  633,600,000  in- 
ches. Admitting  these  enormous  figures  to  give  correctly  the 
sum  of  all  the  units,  the  inch  of  card-paper,  sustained  by  consent 
alone,  and  accepted  as  the  money  of  the  country,  would  have 
more  exchangeable  value  than  the  greenback  dollar — more  be- 
cause the  number  of  the  units  would  be  fewer  and  the  volume 
less.  Of  legal  tenders  and  national  bank  notes,  exclusive  of 
fractional  currency,  there  are  now  in  use  nearly  $690,000,000. 
If  the  bits  of  card-paper  bore  the  seal  of  the  government,  were 
called  dollars  and  made  legal  tender,  they  would  be  worth  no 
more  or  less.  A name  could  not  change  their  character,  or  in- 
vest them  with  a new  property.  If  I am  correct  in  saying  that 
consent  and  general  acceptance  will  convert  any  fitting  substance 
into  money,  the  units  having  a value  inversely  in  proportion  to 
the  sum  of  the  whole,  I cannot  be  mistaken  in  my  positions.  I 
have  only  made  deductions  from  the  principles  announced  in  the 
beginning. 

At  this  point,  after  all  the  adjustment  had  been  made,  and  the 
value  of  the  unit  become  fixed,  suppose  population  and  business 
were  gradually  enlarged  till  the  needful  exchanges  were  doubled. 
While  this  change  was  going  on,  and  not  corrected  by  counteract- 
ing influences,  the  demand  for  money  would  continually  increase, 
attended  by  stringency,  falling  prices,  and  an  augmented  value 
of  the  circulating  medium  (inch  bits).  The  effects  would  be  the 
same  as  those  resulting  from  contraction  in  a financial  crisis. 
Owing  to  the  pressure — pressure  against  an  inflexible  barrier — the 


19 


inch-bit  would  constantly  appreciate  till  its  purchasing  power 
was  doubled.  When  this  result  had  been  reached,  and  the  new 
measure  of  value  become  the  established  one,  the  currency  would 
be  again  equal  to  the  demand,  and  sufficient,  with  the  lower 
prices,  for  the  work  assigned  it.  On  the  other  hand,  if  the  vol- 
ume of  the  currency  (the  number  of  its  units)  were  increased 
simultaneously  with  the  enlargement  of  business,  and  proportion- 
ally to  it,  then  there  would  be  no  augmented  demand  for  a 
medium  of  exchange,  no  stringency,  no  fall  of  prices,  no  rise  in 
the  value  of  money,  and  no  disturbance  of  any  kind.  Other 
effects  would  of  course  be  produced  by  a diminished  population 
and  declining  trade.  There  would  be  fewer  products  to  be  ex- 
changed, and  too  much  currency  for  the  work  till  rising  prices 
had  increased  the  demand  for  it. 

It  may  be  unnecessary  here  to  say  that  I am  not  about  to 
recommend  for  adoption  the  currency  described  in  the  last  two 
paragraphs.  I am  in  pursuit  of  a principle,  and  seek  illustra- 
tions. 


II. 

The  Effect  of  Limitation  or  Volume  on  Value. 

The  effect  of  limitation  or  restricted  issues  on  an  irredeemable 
currency — the  same  effect  which  follows  restricted  supply  in 
every  department  of  trade— may  deserve  further  elucidation  and 
remark. 

In  a rich  country,  with  a diverse  and  complex  industry,  a very 
large  proportion  of  its  wealth  is  created  or  held  for  exchange. 
Though  the  exchanges  to  be  made  cannot  well  be  estimated,  they 
are  certainly  limited,  and  definite  in  amount.  They  are  effected 
by  the  agency  or  intervention  of  money  (or  some  substitute  for 
it),  or  rather  of  the  exchangeable  value  which  is  its  essential 
attribute.  Its  efficacy  or  power  for  work  is  proportionate  to 
its  value.  As  the  exchanges  to  be  made,  and  the  services  to  be 
performed  are  limited,  the  value  which  can  find  employment 
must  be  correspondingly  restricted.  A sufficiency  having  been 


20 


provided,  there  is  no  call  or  room  for  more.  As  the  farmer  in 
tilling  his  acres  can  make  use  of  only  a certain  number  of  plows, 
so  the  trader  who  buys  the  crops  has  need  of  only  a certain  value 
in  exchange.  In  either  case,  the  implements  supplied  and  not 
wanted  would  be  useless  surplusage.  If  I buy  a cow  for  fifty 
dollars,  that  is  all  the  money  that  can  aid  me  in  paying  for  it. 
So  in  every  purchase  or  sale;  so  in  the  aggregate  of  all  purchases 
and  sales;  a certain  number  only  of  dollars  of  fixed  value  can 
take  part  in  the  transfer.  Were  the  currency  gold  and  silver,  any 
additions  beyond  the  demand  for  exchanges  would  go  into  the 
melting  pot  or  be  exported.  In  this  way  is  an  over-supply,  fol- 
lowed by  depreciation,  prevented.  But  inconvertible  paper  is 
worth  nothing  for  exportation  or  in  the  arts;  and  as  paper  mere- 
ly, of  the  finer  sort,  it  is  spoiled  by  the  ink.  But  for  circulation, 
it  is  more  or  less  valuable.  However  large,  the  new  issues,  be- 
sides being  cleaner,  are  as  good  as  the  old,  and  for  that  reason 
cannot  be  ejected.  A currency  of  this  kind  has  no  power  of  self- 
protection and  recuperation.  Unlike  coined  money,  when  once 
in  excess,  it  cannot,  by  any  process  originating  with  itself,  be 
depleted  so  as  to  recover  its  natural  volume  and  value.  Its  non- 
exportable quality,  so  attraction  to  some,  is  fatal  to  it. 

Though  the  total  value  of  the  circulating  medium  admit  of  no 
increase,  the  volume  of  irredeemable  notes  may  be  indefinitely 
enlarged.  The  enlargement  and  consequent  cheapening  of  mon- 
ey will  not  necessarily  increase  the  demand;  nor  will  the  supply, 
however  great,  glut  the  market.  Demand  and  supply,  in  truth, 
do  no  relate  to  volume  but  to  value  alone.  When  it  is  said  that 
money  is  in  demand,  and  loans  are  sought  at  high  rates  of  interest, 
it  is  meant  that  for  the  moment  more  value  is  needed  for  the  easy 
transaction  of  business.  Enhanced  prices  naturally  keep  pace 
with  enhanced  volume,  and  absorb  all  the  currency  which  may  be 
offered  whatever  the  amount.  A few  years  ago,  the  purchaser  of 
a horse  was  required  to  give,  say,  a hatful  of  confederate  dollars, 
the  money  price  in  the  Southern  States  having  risen  in  that  pro- 
portion. At  the  point  named,  the  supply  was  not  in  excess  of  the 
demand.  For  everything  having  exchangeable  value,  except  in- 
convertible circulating  notes,  the  demand  ceases  after  the  want 
which  calls  it  forth  is  supplied.  For  them  it  continues  unchecked 
by  the  supply.  When  additions  are  made,  the  injury  (decline 
in  value)  falls  exclusively  and  equally  on  the  units,  whether  called 
dollars,  pounds  sterling,  francs,  or  inch-bits.  Without  altering 


21 


the  aggregate  value  of  the  mass,  they  degrade  the  parts,  each 
denomination  losing  in  the  proportion  that  the  number  is  in- 
creased. When  taken  to  market,  the  depreciated  medium,  so 
long  as  it  continues  to  be  money,  will  purchase  anything  found 
for  sale,  but  it  must  be  given  in  greater  bulk,  or  more  volume, 
five  dollars,  say,  for  four,  three  or  two,  as  in  the  late  war  and 
subsequently.  The  word  dollar,  when  signifying  a certain  pro- 
portion of  the  total  value  of  a currency,  has  a definite  meaning, 
but  is  scarcely  intelligible  when  it  gives  no  clue  to  proportion,  or 
none  which  is  constant.  It  is  like  the  share  in  a railroad  or  min- 
ing company.  The  latter  may  have  an  established  value  so  long 
as  it  represents  solid  capital  well  expended;  but  the  word  sug- 
gests no  certain  idea  when  rogues  and  speculators — men  with 
large  watering  pots  in  their  hands,  and  fraud  in  their  hearts — be- 
come directors  and  issue  the  certificates.  Water  has  the  same 
effect  upon  an  irredeemable  currency  as  it  has  upon  a railroad 
share  or  the  milk  man’s  quarts.  In  each  case  it  increases  the 
bulk  or  volume;  adds  to  the  number  of  dollars,  shares  or’quarts, 
but  does  not  give  more  value  to  the  whole.  The  loss  falls  wholly 
on  the  units  or  parts,  and  the  receiver  is  swindled  to  the  extent 
of  the  water  he  is  served  with  and  pays  for.  To  make  the  unit 
conform  to  the  name  it  bears,  and  to  restore  its  value,  the  water 
must  be  squeezed  out  or  drawn  off.  If  our  rulers,  “ in  Congress  as- 
sembled,” who  too  often  reflect  the  errors,  prejudices  and  passions 
of  the  voters,  or  are  controlled  by  sectional  and  class  interests, 
will  water  the  currency  they  should  be  stripped  of  authority,  and 
their  activities  turned  into  less  criminal  channels.  Hitherto  the 
government  has  been  the  great  champion  of  the  water-pot.  It 
led  the  way,  and  wears  the  belt.  Corporate  and  especially  rail- 
road swindlers  have  been  followers — successful  imitators— but 
scarcely  rivals. 

If  there  be  those  who  desire  augmented  value  and  efficiency  in 
the  currency,  on  the  ground  that  “ the  wants  of  trade  ” demand 
it,  and  seek  to  attain  that  object  by  further  issues  of  inconvertible 
notes,  they  ought  to  know  that  the  means  are  quite  inappropriate, 
and  that  the  end  sought  can  never  be  reached  by  efforts  in  that 
direction.  Debased  and  crippled  dollars  cannot  give  efficiency. 
Trade,  in  truth,  never  asks  for  dollars,  though  individuals  may. 
Value— exchangeable  value — to  whatever  form  of  money  it  may 
attach  itself  is  the  one  thing  needful.  The  wants  referred  to  are 
not  the  wants  of  trade  but  of  certain  traders  and  schemers  who 


2 2 


hare  given  notes  for  property  which  they  wish  to  sell.  They 
seek  not  more  value  in  the  circulating  medium,  but  less  in  the 
units.  They  desire  more  dollars  because  these  would  carry  up 
prices,  relieve  adventurers  who  have  bought  on  credit,  and  cause 
a new  distribution  of  the  products  of  industry.  Real  estate  or  a 
“store”  full  of  goods  will  go  twice  as  far  in  discharging  obliga- 
tions when  the  dollar  is  worth  but  fifty  cents,  as  it  will  when 
equal  to  one  hundred  cents.  There  are  among  us  many  more 
who  comprehend  this  truth,  in  all  its  bearings,  than  there  were 
ten  years  ago.  Hence  the  frantic  call  in  certain  quarters  for 
cheaper  money. 

Enlarged  volume  or  inflation  means  more  units  at  a reduced 
value,  $900,000,000  say  to  do  the  work  of  $600,000,000.  To 
make  one  of  the  larger  sum  equal  in  value  or  purchasing  power 
to  one  of  the  smaller  is  physically  impossible,  though  there  are 
those  who  claim  to  think  otherwise.  The  obvious  way  to  correct 
the  disparity  is  to  reverse  the  process  which  occasioned  it,  and 
remove  the  intruding  and  superfluous  units.  This  is  the  natural, 
most  sensible  course  to  pursue  with  the  present  currency  of  the 
United  States.  The  additions — those  not  demanded  by  the  con- 
siderable increase  of  production  and  the  exchanges — which  have 
been  made  since  the  date  of  the  legal  tender  law  have  at  no  time 
added  a dime  to  its  value  or  purchasing  power.  The  unit  (dol- 
lar) lias  been  so  degraded  by  excessive  emissions  that  it  is  now 
worth  but  eighty-seven  cents,*  with  no  better  result  than  injus- 
tice and  dishonor.  Like  the  frog  in  the  fable,  the  medium  of 
trade  has  been  inflated  indecently.  It  has  more  circumference 
than  formerly,  a wider  diameter,  but  the  increase  is  due  to  wind, 
or  at  best  water.  Nor  would  more  expansion,  as  advocated  by 
certain  mischief-makers,  cure  or  mitigate  the  evil.  On  the  con- 
trary, if  the  disease  be  dropsy,  as  the  evidence  indicates,  it  would 
intensify  all  the  symptoms,  and  make  still  more  imperative  the 
conclusive  surgery  so  much  dreaded.  It  would,  when  the  times 
again  favor,  renew  the  speculation,  infatuation,  disaster  and  dis- 
grace of  the  past. 

As  those  familiar  with  underlying  principles  will  admit,  all  that 
is  necessary  to  maintain  the  value  of  the  irredeemable  United 
States  note,  or  to  raise  it  to  the  level  of  specie,  is  to  restrict  the 


* This  part  of  the  essay  was  written  in  the  winter  of  1874-5,  when  gold  was  worth  about 
115.  The  remainder  was  prepared  at  different  times,  as  leisure  permitted,  often  with  long 
intervals. 


23 


issue.  It  is  not  the  bad  faith  of  the  government,  its  broken 
promise  a thousand  times  repeated,  the  wide-spread  doubt  of  its 
ultimate  redemption,  or  our  large  foreign  debt  that  keeps  it  in 
the  mire,  and  perpetuates  the  evils  of  depreciation.  So  long  as 
consent  is  not  withdrawn,  and  the  total  emissions  continue  un- 
changed, a better  credit  could  not  improve  it,  or  a worse  one 
harm  it.  Convertibility  sets  up  a barrier  to  depreciation,  but 
what  is  called  public  credit,  or  the  faith  of  the  nation,  in  an  ac- 
cepted, irredeemable  tender-note  has  no  influence  whatever,  and 
no  meaning.  The  promise  to  “pay  to  bearer  one  dollar”  signi- 
fies nothing  so  long  as  the  note  itself  is,  in  law,  the  dollar  prom- 
ised. Those  in  ignorance  of  the  causes  of  depreciation,  including 
some  orators  in  Congress,  talk  in  a dreary,  meaningless  way 
about  the  inherent  excellence  of  the  greenback,  the  vast  “ wealth 
that  lies  behind  it,”  the  great  resources  of  the  country,  the  un- 
doubted solvency  of  the  nation,  etc.,  as  if  these  were  sufficient 
reasons  for  a higher  value.  The  legal  tender  note  has  in  truth 
nothing  behind  it — nothing,  I mean,  which  the  bill-holder  can 
take  or  even  touch  with  safety — nothing  but  a dreamy,  intermit- 
tent hope  that  at  some  time  or  other,  in  this  century  or  the  next, 
the  government  may  redeem  it  or  curtail  the  supply.  On  the 
fourteenth  day  of  January,  1875,  Congress,  catching  through  the 
mist  of  politics  a glimpse  of  truth  and  duty,  attempted  (so  I am 
willing  to  believe)  to  put  something  behind  it,  but  with  poor 
success,  if  outward  appearances  and  the  most  dismal  forebodings 
are  indications.  The  “ resources  ” so  much  vaunted  are  excellent, 
but  what  are  they  to  him  who  is  without  coercive  means,  and 
whose  claim  the  law  scouts?  But  the  public  faith,  it  will  be 
said,  is  pledged  in  this  matter.  In  answer  to  this,  it  may  be  re- 
plied that  that  faith  which  does  not  secure  conversion  into  some- 
thing more  substantial  than  itself,  or  will  not  prevent  deprecia- 
tion by  limitation,  is  not  an  element  of  value.  Not  in  the  small- 
est degree  can  it  compensate  one  who  is  continually  suffering, 
getting  lean  and  gaunt  from  short  measure,  and  pleading  for  re- 
form. In  point  of  fact,  the  government  does  not  promise  to  pay 
its  circulating  notes  in  specie,  but  in  “dollars,”  and  the  highest 
court  of  the  land,  in  defiance  of  its  own  record,  has  decided  that 
a note  for  dollars,  even  when  given  before  the  tender-act,  is  a 
note  for  greenbacks.  Congress  can  be  more  just  than  the  court, 
and  pay  in  coin  as  in  duty  and  honor  bound,  but  will  it?  Its 
promise,  so  called,  has  been  broken  more  than  ninety-nine  thou- 


24 


sand  times,  certainly  as  often  as  payment  to  the  note-holder  has 
been  denied  or  deferred  since  the  war,  and  every  one  can  judge 
for  himself  how  much  that  commodity  is  now  worth.  But  the 
new  promise,  explicit  in  its  terms,  formally  pledging  payment, 
in  specie,  on  the  first  day  of  January,  18*79,  may  if  politicians 
and  misguided  economists  will  permit,  and  the  courts  do  not  de- 
cide that  that  too  may  be  discharged  with  greenbacks,  may  lead 
to  something  important.  At  the  present  writing,  however, 
the  outlook  is  not  assuring.  The  persistent  attempt,  not  to 
amend,  but  to  repeal  the  act,  and  repudiate  the  pledge  given 
to  return,  without  interest,  the  value  received  from  the  public 
creditors  fourteen  years  ago,  does  no  honer  to  those  making  it. 

[The  recent  very  considerable  appreciation,  or  increased  pur- 
chasing power,  of  the  greenback  (equal  to  a fall  in  the  price  of 
commodities)  is  not  due  to  the  act  of  January,  18*75,  nor  even  to 
the  voluntary  surrender  of  their  circulation  by  certain  banks,  but 
to  the  great  depression  of  business.  While  the  demand  for  goods 
and  property,  owing  to  misfortune  and  the  “hard  times,”  has 
been  much  curtailed,  holders,  for  many  reasons,  have  been  striv- 
ing to  sell,  and  in  the  attempt  to  do  so  have  run  down  prices  so 
that  two  dollars  now  will  buy  as  much,  in  most  cases,  as  three 
would  five  years  ago.  The  depression  referred  to  has  extended 
to  Europe,  and  over  the  civilized  world,  producing  a degree  of 
the  same  effect  on  specie  as  on  the  legal-tender.  The  latter  has 
been  appreciated  more  than  the  former  because  the  business  of 
this  country  has  suffered  more  than  that  of  other  countries.  For 
loaning,  greenbacks  are  plentiful  and  cheap,  but  scarce  and  dear 
when  wanted  in  exchange  for  commodities  and  estate.] 

Mr.  McCulloch,  in  the  New  York  Tribune , writes  for  the  most 
part  sensibly  on  the  money  question,  but  falls  into  several  grave 
errors  and  inconsistencies,  and  sometimes  forgets  his  own  admis- 
sions. Alluding  to  the  legal  tender-note,  he  says:  “No  act  of 
Congress  can  give  it  a value  beyond  its  convertible  value.”  “ Con- 
gress is  utterly  powerless  in  fixing  a value  upon  it  without  provi- 
ding for  its  redemption.”  This  he  affirms  with  the  greenback 
staring  him  in  the  face,  which  has  to-day  (January,  1875)  an  ex- 
change value  of  eighty-seven  cents  per  dollar  in  gold  without  any 
certain  “ provision  for  its  redemption.”  The  truth  is  the  govern- 
ment has  complete  control  over  the  value  of  an  irredeemable  and 
accepted  treasury  note,  not  by  giving  it  a respectable  name,  not 
by  enacting  how  much  it  shall  be  taken  for,  but  by  limiting  the 


25 


suppty.  Mr.  McCulloch  himself  proceeded  on  this  theory  when 
he  undertook  to  appreciate  these  notes  by  withdrawing  a part 
from  circulation.  Notwithstanding  his  assumption  that  the  gov- 
ernment can  give  no  value  to  paper  which  is  not  convertible,  or 
none  “ beyond  its  convertible  value,”  he  concedes  value  from 
another  source  than  convertibility  when  he  affirms  that  the  ten- 
der-note is  worth  as  much  as  it  is,  or  “ is  not  greatly  depreciated 
because  the  United  States  are  a great  nation,  rich  in  undeveloped 
resources,  if  not  in  actually  acquired  wealth,”  etc.  While  it  is 
true  that  Congress  cannot  create  value  in  money  or  anything  else, 
it  is  a mistake  to  suppose  that  convertibility  is  the  only  founda- 
tion and  stay  of  that  value.  The  supposition  is  in  conflict  with 
our  daily  experience,  and  of  course  destruction  of  the  claim  that 
national  greatness  and  abundant  “resources”  are  elements  of 
value.  Writers  on  this  subject  are  led  astray  by  assuming  that 
an  inconvertible  currency  note  and  an  interest  bearing  bond, 
both  issued  by  the  government,  and  reading  somewhat  alike,  owe 
their  value  to  the  same  causes.  Because  the  bond  is  worth  more 
in  proportion  to  the  established  credit,  financial  ability  and  abun- 
dant resources  of  the  government,  they  hastily  conclude  that  the 
same  is  true  of  the  note.  The  two  have  a similar  appearance, 
and  bear  the  same  signature.  Both  promise  to  pay  dollars,  but 
they  differ  widely  in  other  respects  One  carries  interest,  and 
to  that  fact  is  its  value  due.  For  that  alone  is  it  sought  as  an 
investment.  Did  it  not  afford  an  income,  and  were  it  payable 
at  pleasure  or  never,  it  would  be  worth  nothing.  The  other  is 
peculiar  in  everything  essential.  Its  promise  is  unmeaning.  It 
pays  no  interest,  furnishes  no  income,  and  has  no  value  as  an  in- 
vestment. Were  the  facts  otherwise  its  character  would  be 
wholly  changed.  Consent  and  general  acceptance  have  imparted 
to  the  note  an  unique  quality — converted  it  into  money.  Thereby 
a new  function  has  been  acquired  which  is  specific  and  distinct — 
one  fitting  it  to  become  the  medium  of  trade,  the  measure  of 
value,  and  the  exchangeable  equivalent  of  whatever  is  offered 
for  sale.  Investing  it  with  the  qualities  most  desirable  in  the 
bond  would  divest  it  of  its  qualities  as  a medium  and  measure. 

Convertibility,  as  I was  about  to  say,  fixes  a limit  to  deprecia- 
tion. It  does  so  by  preventing  over-issues,  or,  in  other  words, 
by  keeping  down  the  volume  of  the  currency  to  the  point  where 
the  law  of  limitation,  intelligently  applied,  would  place  it.  N otes 
which  are  certain  to  be  presented  promptly  for  redemption  will 

4 


26 


be  withheld  or  withdrawn  because  unprofitable.  Convertible 
paper,  near  the  place  of  issue,  can  never  fall  below  that  for  which 
it  may  at  will  be  exchanged.  But  something  as  decisive  may  be 
said  in  favor  of  accepted  inconvertible  notes.  Limitation  or  re- 
stricted volume  is  a barrier  to  declining  value  quite  as  certain  as 
coin  redemption.  By  regulating  the  emissions,  and  in  no  other 
way,  can  a government  whose  pledges  (so  called)  are  of  the  green- 
back stripe  control  value.  All  those  who  desire  resumption,  and 
contend  that  restriction  or  cancellation  will  prepare  the  way  for 
it,  concede  the  principle.  Others  who  oppose  it  too  often  do  so 
because  the  method  urged  to  secure  it  would  be  effectual;  would 
appreciate  legal  tenders,  give  them  more  exchangeable  value, 
and  perhaps  diminish  the  resources  of  many  waiting  to  sell  prop- 
erty which  has  cost  more  than  it  will  fetch.  Instead  of  contrac- 
tion, they  may  want  measures  which  will  renew  speculation  and 
carry  up  prices — measures  which  will  enable  them  to  shift  their 
burdens  to  the  shoulders  of  others,  and  thus  escape  loss  and 
financial  wreck.  Very  naturally,  men  loaded  down  with  estate 
which  they  can  neither  carry  or  sell  desire  relief,  and  sometimes, 
without  thinking  of  the  general  results,  favor  a policy  which 
leads  to  over-issues  and  depreciation.  Because  self-interest  ob- 
scures the  vision,  impending  danger  is  overlooked.  Constant 
watching  and  the  most  strenuous  efforts  are  required  to  preserve 
the  usefulness  of  inconvertible  paper  money,  and  defeat  the 
schemes  of  those  who  would  degrade  it  for  selfish  ends.  When 
supplied  in  excess,  its  diminishing  value  meets  with  nothing  to 
arrest  it.  Once  in  the  gutter  it  is  helpless,  with  no  recuperative 
power.  The  strong  arm  (untrustworthy  in  most  cases)  which 
controls  the  emissions,  alone  can  lift  it  and  sustain  it. 

Facts  then  which  will  not  be  denied,  and  arguments  none  can 
meet  show  that  legal  tenders  owe  their  continued  degradation 
not  properly  to  inconvertibility  but  to  excessive  issues — issues 
for  which  there  is  no  outlet  or  possible  way  of  escape.  The  notes 
are  now  worth  as  much  as  eighty-seven  per  cent,  not  “ because 
we  are  a great  nation,  rich  in  resources;”  not  because  “ the  pub- 
lic credit  is  pledged  ” for  their  redemption;  not  because  they  are 
“ legal  tender  at  their  face;”  but  for  the  better  reason  that  Con- 
gress has  been  more  conservative,  or  rather  less  foolish  and 
wicked  than  it  might  have  been  in  the  use  of  the  watering  pot. 
Had  the  supply  been  checked  reasonably,  as  in  the  case  of  France 
in  her  late  struggle  with  Germany,  there  would  have  been  no 


27 


depreciation,  no  difficulty  in  resumption,  and  no  opposition  to  it 
from  any  quarter.  In  this  matter  the  French  government  ex- 
hibited more  knowledge,  and  sounder  statesmanship  than  ours. 
The  inconvertible  paper  it  permitted  in  a time  of  unparalleled 
embarrasment  was  so  limited  by  inexorable  law  that  its  value 
has  scarcely  declined  for  a period  of  six  years.  Managed  with 
equal  prudence,  it  would  doubtless  be  as  good  as  gold  till  the 
end  of  the  century.  To  raise  the  greenback  to  par,  it  is  not  ne- 
cessary to  do  more  than  retrace  the  steps  which  led  to  its  dis- 
grace, and  cancel  a hundred  or  two  million.  Were  this  course 
further  pursued,  provided  no  other  currency  were  attainable,  it 
could  be  made  more  valuable  than  specie. 

When  I affirm  that  the  volume  of  the  currency  determines  its 
value,  I of  course  refer  to  that  portion  of  it  which  is  in  circula- 
tion. If  a part  for  want  of  use  is  stored  away  in  the  vaults  of 
banks  or  in  private  safes,  as  always  happens  when  business  is 
depressed,  that  should  be  left  out  of  the  account.  Greenbacks 
or  national  bank  notes  thus  disposed  of  are  for  practical  purposes 
retired,  and  can  have  no  effect  till  called  forth  for  service.  The 
two  kinds  of  notes — those  of  the  treasury  and  the  banks — are 
equally  active  and  efficient,  and  as  money  have  in  ordinary  cases 
nothing  to  distinguish  them.  In  this  essay  I have  kept  the  green- 
back prominently  in  the  foreground  because  that,  and  that  only, 
blocks  the  way  to  reform. 

The  effect  of  limitation  is  seen  in  the  sustained  value  of  the 
subsidiary  coins  of  a country  which  are  usually  made  propor- 
tionally lighter  than  the  unit-pieces.  Nothing  is  required  to  en- 
sure their  circulation  at  their  face  value  but  to  stint  the  supply. 
Government  credit  and  the  wealth  of  the  people  have  no  more 
to  do  with  it  than  with  the  flowing  of  the  tides.  The  copper 
cent  and  the  five  cent  nickel-piece  have  many  times  more  ex- 
changeable value  than  the  metals  they  contain.  If  limitation,  as 
in  these  cases,  can  add  to  intrinsic  value  several  hundred  per 
cent,  it  may  add  to  it  indefinitely.  The  quantity  of  metal,  in- 
deed, is  of  no  account.  Whether  much  or  little  it  goes  for  noth- 
ing. A bit  of  paper  inscribed  “ one  cent  ” or  “ five  cents  ” would 
do  as  well,  as  we  have  abundant  opportunity  to  know.  Were 
the  coins  named  much  heavier  than  now,  they  would  be  worth 
no  more  till  their  increased  weight  made  them  more  valuable  as 
copper  and  nickel  than  as  money.  Not  till  their  commercial  ex- 
ceeded their  nominal  or  conventional  value  would  they  cease  to 


28 


circulate.  It  is  usual  to  make  a subsidiary  currency  convertible 
into  money  of  a higher  denomination,  but  this  is  not  important 
except  that  an  outlet  is  thereby  provided  for  excessive  issues, 
and  depreciation  prevented.  Unquestionably,  the  gold  dollar,  in 
places  where  that  is  a part  of  the  currency,  might  be  made  lighter 
by  one-tenth,  one-quarter  or  more,  without  impairing  its  value, 
were  the  supply  sufficiently  restricted.  Thus  restricted,  the  new 
would  circulate  by  the  side  of  the  old  coins  till  supplied  in  suffi- 
cient number  to  satisfy  the  whole  legitimate  demand,  when  the 
last  of  the  older  and  heavier  would  disappear.  Were  the  re- 
striction at  this  point  removed,  and  the  new  issues  continued, 
there  would  be  progressive  depreciation  till  the  exchangeable 
value  of  the  pieces  was  equal  only  to  the  gold  they  contained. 
Whatever  is  true  of  the  dollar  is  equally  so  of  any  or  all  the 
other  coins.  So  indispensable  are  they,  so  intense,  in  the  absence 
of  other  money,  would  be  the  demand  that  scarcity-,  artificial  or 
natural,  might  force  up  the  value  ten  fold.  When  thus  forced, 
their  exchangeable  would  exceed  their  commercial  value  in  the 
same  proportion.  Under  such  circumstances,  they  would  be  too 
valuable  for  conversion  into  bullion,  or  for  exportation.  Worth 
more  for  money  than  for  anything  else,  they  would,  like  irre- 
deemable, depreciated  notes,  obstinately  continue  in  circulation. 
Curtailing  the  supply,  then,  may  add  to  convertible,  intrinsic  or 
conventional  value  indefinitely.  When  this  fact  is  fully  under- 
stood, and  appropriate  legislation  is  no  longer  withheld,  suitable 
preparation  will  have  been  made  to  raise  greenbacks  to  the  level 
of  gold.  Mr.  McCulloch’s  management  was  not  always  discreet, 
but  his  method  by  contraction  was  the  proper  one.  Had  he  been 
allowed  to  proceed,  the  inevitable  catastrophe — inevitable  be- 
cause its  causes  were  already  in  existence — though  probably  oc- 
curring earlier,  would  doubtless  have  been  less  disastrous  than 
that  of  1873,  and  not  as  provokingly  lasting  in  its  effects. 

At  the  present  moment,  (fall  of  1876,)  the  change  which  for 
some  time  has  been  going  on  in  the  value  of  silver  is  attracting 
much  attention.  Considered  as  bullion  and  comparing  it  with 
gold,  its  depreciation,  owing  chiefly,  as  is  claimed,  to  the  adop- 
tion of  an  exclusive  gold  standard  in  Germany,  the  smaller  de- 
mand for  exportation  to  India,  and  the  increased  production  in 
our  western  states,  now  amounts  to  fifteen  or  twenty  per  cent. 
The  facts  connected  with  this  extraordinary  change  illustrate 
the  preceding  remarks. 


29 


To-day  the  metal,  silver,  is  worth  several  per  cent  less  than 
greenbacks.  This  accident,  pregnant  perhaps  with  very  import- 
ant results,  has  led  to  its  reintroduction  among  us  as  a substitute 
for  fractional  paper  currency.  Having  the  legal  tender  quality  in 
small  sums,  the  coin  of  course  circulates  freely  at  its  nominal 
value.  Two  fifty  cent  pieces  containing  three  hundred  and  eighty 
four  grains  of  standard  silver  are  to-day  worth  intrinsically 
eighty-one  cents  in  gold.  This  is  their  convertible  or  commer- 
cial value;  yet  as  money  they  are  equal  to  the  ‘‘trade  dollar” 
weighing  four  hundred  and  twenty  grains,  or  to  the  greenback 
dollar  worth  eighty-nine  cents  (gold).  Were  paper  out  of  the 
way  and  gold  the  only  legal  tender,  they  would  at  once  rise  to 
par.  They  would  do  so  though  the  public  credit  should  go  to 
the  dogs.  But  the  only  condition  on  which  a subsidiary  coin  (or 
indeed  any  other  currency)  can  rise  above  its  convertible  value 
is  its  limitation  in  volume.  Issued  in  excess — in  excess  of  the 
legitimate  uses  for  it — it  will  not  be  received  in  exchange  for 
property  except  at  a rate  proportioned  to  its  depreciation.  In 
this  case,  whatever  their  short-comings,  governments  are  wont 
to  provide  a sufficient  safeguard  against  that  contingency.  So 
far,  at  least,  they  all  understand  the  principle  and  effect  of  limi- 
tation. The  only  way  that  a double  standard  of  value,  say  of 
gold  and  silver,  can  long  be  maintained  is  by  the  application  of 
this  principle.  Should  one  of  the  metals  decline  in  value,  a re- 
stricted coinage  will  prevent  its  fall  as  a medium  of  exchange, 
or  as  money,  and  make  it  equal  to  the  dearer  metal.  Since  this 
decline,  France,  it  is  understood,  has  put  in  practice  with  entire 
suceess  the  limitation-method  to  preserve  its  duplex  standard. 
When  the  inequality  is  caused  wholly  by  the  depreciation  of  one 
of  the  metals,  used  as  standards,  the  other  remaining  fixed,  as 
seems  to  be  the  fact  in  the  present  instance,  the  French  method 
is  the  proper  and  just  one.  But  if,  on  the  contrary,  one  have 
appreciated  while  the  other  is  unchanged,  justice  requires  that 
the  cheaper  and  more  stable  metal  should  become  the  standard. 
A coinage  supplying  the  latter  to  the  extent  of  the  demand 
would  secure  the  desired  end — secure  it  by  driving  the  more 
valuable  money  out  of  circulation— -leaving  the  least  valuable 
to  fill  the  void.  In  our  case,  a law  giving  silver  dollars  of  the 
old  pattern  their  former  legal  tender  quality  for  all  amounts,  the 
mint  being  free  to  all,  could  not  demonetize  or  force  out  of  use 
our  irredeemable,  and  intrinsically  valueless  paper  currency.  On 


30 


the  contrary,  the  silver  coins  would  mingle  harmoniously,  as  they 
were  issued,  with  our  now  more  valuable  greenbacks,  increasing 
the  volume,  and  reducing  proportionately  the  value  of  the  units, 
till  the  whole  mass  had  been  degraded  to  the  silver  level  what- 
ever that  might  be.  If  afterward  silver  happened  to  rise,  the 
other  conditions  remaining  the  same,  it  would  carry  up  legal  ten- 
ders to  their  old  position,  but  could  not  give  them  a higher  value 
than  they  had  before  so  long  as  the  volume  was  undiminished. 
If  at  this  point  the  upward  movement  of  silver  were  continued, 
paper,  unable  to  follow,  would  again  become  the  sole  medium  of 
exchange  and  standard  of  value,  while  silver  coin  would  be  demon- 
etized as  gold  is  now. 

With  an  unrestricted  coinage,  a double  standard  of  value  is 
practically  impossible — impossible  because  the  relation  of  the 
two  metals  is  perpetually  changing.  Suppose  to-day,  gold  as 
compared  with  silver  be  worth  in  the  proportion  of  one  to  six- 
teen. If  in  that  case  the  gold  dollar  should  be  made  to  weigh 
25.8  grs,  standard  fineness,  the  silver  dollar  must  weigh  412.5 
grs.  Undoubtedly  they  would  circulate  together  so  long  as  they 
remained  of  equal  value;  but  let  the  smallest  change  occur  in 
either  of  the  factors— a change  sufficient  only  to  pay  the  cost  of 
melting  or  exportation— and  the  double  standard  would  disap- 
pear. The  cheapest  metal  alone  would  be  used  to  discharge  debts, 
while  the  dearer  would  become  merchandise.  The  saving  of  so 
small  a proportion  as  one-quarter  of  one  per  cent  would,  as  in  other 
business  transactions,  be  a sufficient  ground  of  preference.  Many 
times  have  governments  (including  our  own)  attempted  to  so 
adjust  the  weights  of  the  respective  coins  that  both  metals  would 
continue  in  use,  but  in  every  instance  has  the  attempt  signally 
failed. 

Limited  supply,  from  whatever  cause,  increases  the  exchange- 
able value  of  commodities  as  well  as  money.  Producers  and 
dealers  understand  this  too  well.  Whenever  they  get  the  power, 
whether  by  monopoly,  combination  or  otherwise,  they  always 
manage  to  understock  the  market,  and  thus  increase  their  gains, 
while  consumers  suffer.  The  principle  applies  to  every  thing 
held  for  exchange.  The  demand  given,  the  less  there  is  of  the 
thing  sought  the  greater  the  value  of  its  units  or  parts.  A de- 
cisive way  to  test  the  efficacy  of  any  of  the  untried  schemes  for 
resumption  (their  name  is  legion) — schemes  which  often  prom- 
ise to  reach  the  desired  end  by  easy,  pleasant  ways  without  any 


31 


disturbance  of  values  or  business  interests — is  to  show  what  ef- 
fect will  be  produced  on  the  currency-supply.  If,  as  a result, 
no  notes  would  be  cancelled  or  retired  no  progress  will  be  made. 
The  sufficiency  of  limitation  is  conceded  when  so  much  evil  is 
apprehended  from  restricted  issues. 

Should  the  government  pledge  itself  (giving  as  individuals  do 
ample  security)  to  redeem  its  currency  notes  in  specie  in  ten  years, 
the  secured  pledge  alone  would  not,  for  a considerable  time  at 
least,  raise  their  value  so  much  as  a mill.  But  if  the  time  were 
made  two  years,  and  no  one  doubted  prompt  payment,  green- 
backs (estimating  the  gold  premium  at  ten  per  cent.)  would 
be  worth  five  per  cent,  per  annum  to  hold  as  an  investment — 
to  hold  as  one  holds  a note  coming  due  in  two  years.  Under 
these  circumstances,  they  would  be  withdrawn  from  circul- 
ation till  the  growing  scarcity  had  carried  up  the  value  of  the 
remainder  to  a point  which  made  hoarding  less  profitable  than 
loaning  at  current  rates,  when  the  former  (contraction)  would 
cease,  to  be  again  renewed  as  the  period  for  redemption  ap- 
proached. The  fact  that  Mr.  Sherman’s  bill  of  January,  1875, 
requiring  the  government  to  pay  its  notes  in  coin  on  the  first  of 
January,  1879,  has  had  no  more  effect  on  their  specie  value,  is 
doubtless  due  to  a suspicion  that  it  was  not  passed  in  good  faith; 
that  it  lacks  provisions  essential  to  its  best  success,  and  that  it 
will  not  be  carried  into  execution  at  the  time  designated.  Were 
the  promised  resumption  confidently  expected,  greenbacks  would 
be  sought  as  government  securities  redeemable  in  two  years, 
and  paying  to  the  holder  five  per  cent,  per  annum  in  coin. 

The  men  who  are  so  alarmed  at  the  thought  of  retiring  legal 
tenders,  and  the  consequent  shrinking  of  nominal  values  are  us- 
ually those  who  strenuously  contend  that  no  depreciation  or  other 
injury  can  result  from  expansion.  When  reminded  of  the  exist- 
ing inferior  purchasing  power  of  circulating  notes,  and  the  pre- 
mium which  is  paid  for  coin,  both  decisive  indications  of  currency 
degradation,  they  attribute  the  disparity  to  the  altered  value  of 
gold,  or  to  any  cause  but  the  true  one.  They  devise  futile  plans 
to  force  down  specie,  as  if  specie  value  could  be  manipulated  as 
successfully  as  the  paper  supply,  and  at  the  same  time  oppose 
fervidly  the  only  method  by  which  equality  can  be  established. 
Of  two  possible  alternatives,  we  can  take  our  choice.  One  re- 
quires a liberal  cancellation  of  notes;  the  other,  their  convertibil- 
ity, on  demand,  into  coin  or  something  equal  to  it.  Whichever 


32 


plan  is  pursued,  the  same  result — limitation  of  supply — follows. 
It  is  folly  (or  worse)  to  try  some  middle  course,  to  attempt  the 
impracticable,  to  waste  time  on  shams,  or  to  cheat  one’s  self  with 
false  hopes. 

The  advantages  of  our  irredeemable  paper  currency  should  not 
be  overlooked.  It  is  convenient,  portable  in  large  sums,  and 
may  be  counted  with  great  facility.  Its  first  cost  is  comparative- 
ly little,  though  the  constant  outlay  for  repairs  or  renewal  is  a 
more  serious  matter.  It  is  doubted  whether  the  annual  expense 
is  less  than  that  incurred  by  the  use  of  coin.  When  the  issues 
are  confined  within  impassable  limits,  and  the  other  forms  of 
credit  are  not  abused;  when  the  exchanges  to  be  made  from 
year  to  year  are  nearly  the  same,  and  goods  are  never  bought 
and  sold  except  for  “ distribution,”  it  is  a trusty  measure  of  value, 
as  perfect  as  any  yet  devised.  Under  the  infrequent,  and  almost 
impossible  circumstances  named,  it  is  not  inferior  to  the  precious 
metals  whose  value  is  largely  dependent  on  the  productiveness 
of  the  mines,  the  methods  of  extraction,  the  consumption  in  the 
arts,  etc.  Its  inflexibility  too  would  tend  to  keep  trade  within 
its  legitimate  limits,  restrict  speculation,  and  clog  with  the  weight 
of  a stringent  money  market  the  initial  steps  which  lead  to  ex- 
citement, inflated  prices  and  devastating  panics.  Under  its  re- 
pressive influence,  the  financial  sky-larking  of  the  years  preced- 
ing 1837  and  1873,  and  the  disasterous  fall  which  in  each  case 
closed  the  exhibition,  would  have  been  very  difficult,  scarcely 
possible.  In  addition,  it  may  be  said  that  an  accepted,  irredeem- 
able, legal  tender  currency,  designed  for  permanent  use,  cancels 
obligations,  leaving  no  debt  behind;  while  a convertible  treasury 
or  bank  note  pays  (it  has  been  said)  by  transferring  to  the  cred- 
itor a claim  against  a third  party.  There  is  always  left,  as  a 
residuum,  this  unsatisfied  claim;  but  that  does  not  prevent  the 
note  from  discharging  other  claims — does  notin  the  least  disable 
it  as  a debt-paying  instrument. 

The  advantages  are  undeniable,  but  the  objections  to  the 
money  in  question  are  of  the  most  serious,  if  not  decisive  char- 
acter. If  it  admit  of  no  increase,  it  cannot  adapt  itself  to  the 
natural,  ever  varying  wants  of  population  and  trade.  If  the  de- 
mand were  continually  augmented  by  enlarged  industry,  and  a 
more  extensive  business,  there  would  be  a scarcity  of  money,  a 
high  rate  of  interest,  declining  prices,  and  hardship  to  the  debtor 
class — conditions  discouraging  to  producers,  and  fatal  to  general 


33 


thrift.  It  is  true  the  sovereign  power  might,  did  it  but  know 
when  and  how  to  do  it,  remove  the  barrier,  and  supply  the  defi- 
ciency in  the  circulating  medium;  but  the  practical  result  of 
this  interference  would  be  to  destroy  the  good  belonging  to  the 
system,  and  the  introduction  of  a sure  element  of  uncertainty 
and  confusion.  No  government  of  whatever  name  has  wisdom 
or  honesty  enough  for  so  delicate  and  responsible  a work.  Our 
government,  at  least,  was  not  intended,  nor  is  it  competent  for 
that  or  any  similar  service.  So  tremendous  a power,  to  be  ex- 
ercised at  discretion,  especially  when  the  legal  tender  principle 
is  involved,  can  with  safety  be  lodged  nowhere.  Least  of  all 
ought  it  to  be  confided  to  political  parties,  each  striving  to  cap- 
ture the  popular  vote,  and  each  ready,  perhaps,  to  sacrifice  truth 
and  justice.  On  this  subject,  Mr.  Ricardo  remarks  that  “ neither 
a state  nor  bank  ever  had  the  unrestricted  power  of  issuing  paper 
money  without  abusing  that  power;”  and  the  history  of  the  fu- 
ture, in  this  matter,  will  doubtless  be  that  of  the  past.  Congress 
has  proved  its  utter  unfitness  for  so  important  a trust.  Now  that 
the  supposed  barriers  to  paper  money  emissions  by  the  govern- 
ment have  been  broken  down,  nothing  but  a constitutional 
amendment,  prohibitory  in  its  character,  and  positive  in  its 
terms — one  which,  if  the  legislative  department  prove  recreant, 
the  courts  will  feel  constrained  to  respect — can  save  this  country 
from  one  of  the  direst,  most  seductive  evils  of  modern  times. 


III. 

Money  as  a Measure.  Coin,  its  Stability  and 
the  Confidence  it  inspires. 

As  a means  for  the  satisfaction  of  debts  and  contracts,  it  is 
vastly  important  that  money  should  be  a “reliable  ” measure  of 
value,  as  exact  and  stable,  were  this  possible,  as  the  yard-stick 
is  of  length,  or  the  bushel  and  gallon  of  capacity.  Equally  of 
all,  invariableness  is  the  intended  characteristic,  and  the  ground 
of  usefulness.  Like  the  other  measures,  money  should  be  the 
same  to-day,  to-morrow,  next  week  and  next  year.  Hundreds,  I 
may  say  thousands  of  millions  are  dependent  on  its  trustworthi- 

5 


34 


ness.  It  has  been  objected  to  the  precious  metals  that  they  are 
not  quite  constant,  not  as  trusty  as  the  foot  rule  and  pound 
weight,  but  this  is  not  a good  reason  why  they  should  be  discard- 
ed till  something  better  is  found  to  take  their  place.  Were  not 
money  a measure  reasonably  certain,  the  whole  credit  system 
would  break  down  hopelessly.  No  “time  bargain”  involving 
the  use  of  money  could  be  prudently  made.  No  capitalist  could 
safely  lend,  no  business  man  borrow,  no  banks  of  discount  exist, 
no  notes  be  wisely  taken  or  given,  no  “ trusting  ” over  night. 
In  the  absence  of  a proper  standard,  a life  or  fire  insurance  policy, 
an  annuity,  a salary  or  fixed  income  in  money  can  have  no  cer- 
tain value,  and  can  provide  no  sure  means  of  indemnity  o'r  sup- 
port. Its  necessity  when  justice  and  fair  dealing  are  sought  must 
be  obvious.  If  I buy  of  a farmer  one  hundred  bushels  of  corn, 
and  agree  to  pay  at  the  end  of  thirty  days  one  hundred  dollars,  I 
make  a bargain  satisfactory  to  myself,  promising  to  return  in 
money  a value  equal  to  that  received.  But  if,  when  the  debt 
become  due,  I offer  mutilated  coins  worth  but  seventy-five  per 
cent.,  and  which  may  have  cost  me  but  that,  I attempt  a trans- 
parent fraud.  The  proposal,  as  it  ought,  would  be  received  with 
indignation  because  the  value  tendered  was  but  three-fourths  of 
that  promised.  To  make  imposition  and  dishonesty  more  difficult, 
and  furnish  a measure  which  will  supply  the  wants  of  debtors 
and  creditors  alike,  worth  as  much  several  months  or  years  hence 
as  now,  and  serving  as  a safe  basis  for  contracts,  government  has 
fashioned  a coin  containing  23.2  grains  of  fine  gold,  stamped  it 
with  its  authority,  called  it  a dollar,  and  placed  it  in  the  hands 
of  a too  confiding  people  as  a trusty  and  uniform  measure  of 
value.  Relying  on  its  stability,  a man  may  sell  his  house,  his 
merchandise  or  services  without  the  risk  of  loss  from  a treacher- 
ous standard.  When  payment  is  made,  he  will  get  as  much 
value  or  purchasing  power — as  much  labor  or  labor’s  worth — as 
he  had  before  the  sale,  and  in  a more  available  form.  Each  party 
has  secured  his  object,  and  holds  in  possession  the  full  equiva- 
lent of  the  thing  surrendered.  The  utility  of  an  honest  measure 
of  value — one  that  no  man  or  set  of  men,  speculators  or  politi- 
cians, no  class  whether  debtor  or  creditor,  no  people  in  the  inter- 
est of  a section,  can  alter  or  set  aside — is  thus  illustrated.  No 
one  denys  that  the  other  measures  having  equal  but  not  greater 
impotance  should  be  uniform,  and  that  no  changes  of  a kind  to 
affect  outstanding  contracts  should  be  allowed. 


35 


When  I purchase  one  hundred  yards  of  cloth,  delivery  and 
payment  to  be  made  at  the  end  of  twelve  months,  justice  can  no 
more  be  done  by  paying  defective  dollars  (hard  or  soft)  than  by 
the  delivery  of  abbreviated  yards.  If  the  dollar  be  short  in 
weight  or  value,  the  yard,  pound,  gallon  and  bushel  should  be 
short  in  proportion.  If  the  standard  in  one  case  be  changed  “ to 
meet  the  wants  ” of  buyers,  it  should  be  in  the  others  to  meet 
the  wants  of  sellers.  The  wants  of  a man  who  sells  pounds,  gal- 
lons and  bushels  may  be  as  pressing  as  the  wants  of  one  who 
pays  dollars.  The  person  who  promises  coal,  wheat  or  acres,  is 
entitled  to  as  much  indulgence  as  he  who  promises  money.  If 
the  farmer,  shoemaker,  clergyman  or  laborer  be  compelled  to  take 
“ cheap  money,”  he  should  be  allowed  to  give  cheap  potatoes, 
cheap  shoes,  cheap  sermons  or  cheap  labor.  It  is  as  reasonable 
that  the  measures  of  cloth,  iron,  wood,  etc.,  should  be  short  when 
you  sell  on  credit,  as  the  measure  of  value  when  you  buy  on 
credit.  The  fact  that  the  tailor  who  makes  you  an  honest  coat 
consents  to  wait  a year  for  his  money  is  not  a reason  why  he 
should  accept  dishonest  dollars.  If  each  of  two  parties  be  equally 
meritorious,  and  in  need  of  means  to  do  right,  and  pay  ac- 
cording to  promise,  why  should  they  not  be  served  alike  ? Why 
should  one  be  the  beneficiary  of  the  government  and  not  the 
other  ? All  legislation  sought  for  the  advantage  of  a particular 
class  should  be  as  comprehensive  as  possible,  for  we  are  a people 
purporting  to  have  equal  rights.  The  benefits  accruing  to  cer- 
tain individuals  from  depreciated  money  are  obtained  at  the  ex- 
pense of  others  quite  as  worthy.  When  three  years  ago  Boston 
lost  heavily  by  a conflagration,  some  unthinking  or  selfish  per- 
sons urged  that  government  should  help  that  proud  city  by 
issuing  more  greenbacks,  seemingly  on  the  supposition  that  those 
who  had  contracted  to  deliver  dollars  were  the  only  debtors  or 
persons  that  had  lost  or  deserved  assistance.  Had  the  desired 
issue  been  made  and  the  currency  been  degraded,  all  the  holders 
of  money-contracts  in  the  greenback  states  would  have  suffered 
for  the  benefit  of  a class  of  persons  ninety-eight  per  cent,  of  whom, 
probably,  resided  out  of  Boston;  while  the  merchants  and  capi- 
talists living  there,  in  consequence  of  large  credits  elsewhere, 
might  have  lost,  in  the  aggregate,  more  than  all  the  inhabitants 
gained. 

Cheap  (depreciated)  money  is  a cause  of  cheapness  every- 
where—cheap  patriotism,  cheap  legislation,  cheap  statesmanship, 


36 


cheap  morality,  cheapness  in  Washington  and  Albany,  cheapness 
in  the  courts  and  at  the  polls,  and  cheap  service,  public  and  pri- 
vate, wherever  service  is  due.  Scarcely  had  Congress  passed  the 
tender-law  of  February,  1862,  than  cheap  performance  and  cheap- 
ness in  all  directions  spread  like  an  epidemic.  During  the  war 
it  was  called  “ shoddy,”  and  a famous  character  did  it  become. 
As  the  law  of  retribution  required,  the  government  was  the  first 
to  suffer.  It  was  cheated,  robbed  and  plundered,  on  a magnifi- 
cent scale,  by  its  professed  friends — by  contractors,  speculators, 
politicians,  patriots,  middle  men  and  rings  of  every  name.  The 
practices  thus  introduced  prevailed  without  intermission  till 
checked  (scotched)  by  the  panic  of  1873.  The  appalling  magni- 
tude and  frequency  of  corporate  (particularly  railroad)  unfaith- 
fulness are  largely  due  to  cheap  money,  and  the  phrensy  it  be- 
gat. Without  it,  our  Tweeds  and  Jim  Fisks,  the  mushroom 
growth  of  a profligate  era,  would  have  been  comparatively  un- 
known. 

Having  suffered  severely  from  “ governmental  ” tampering 
with  the  currency,  the  framers  of  the  Constitution  of  the  United 
States,  rejecting  a provision  authorizing  Congress  “to  emit  bills 
of  credit,”  or  notes  of  circulation,  placed  the  different  measures — 
those  of  value,  length,  weight  and  capacity — on  the  same  footing, 
hoping,  doubtless,  to  remove  all  from  the  peril  of  legislative  in- 
terference, and  to  make  them  alike  inviolable.  After  full  dis- 
cussion, the  convention  refused  to  dc  more  than  give  the  power 
“ to  coin  money,  regulate  the  value  thereof  and  of  foreign  coins, 
and  fix  the  standard  of  weights  and  measures.”  The  “value” 
of  the  coins  thus  authorized  was  “ regulated  ” when,  in  April, 
] 792,  Congress  enacted  that  the  American  dollar  (silver)  should 
weigh  412  grains,  and  the  eagle  (gold)  217  grains,  each  to  be  of 
a certain  fineness,  etc.  The  stamp  served  as  a certificate  of 
quantity  and  quality.  Subsequently,  new  coins  were  minted, 
and  slight  alterations  in  weight  made,  that  the  inequalities  grow- 
ing out  of  a double  standard  might  be  corrected.  Thus  was  the 
authority  of  the  Constitution,  (in  this  matter,)  as  then  and  for 
seventy  years  thereafter  understood,  exhausted. 

Of  course,  the  dollar  might,  before  it  had  come  into  use,  have 
contained  any  number  of  grains  of  silver  or  gold — might  have 
been  made  as  “cheap”  as  the  greatest  stickler  for  cheapness 
might  desire,  without  inflicting  injury  on  anybody.  The  wrong 
consists  in  changing  arbitrarily,  perhaps  wantonly,  a standard 


long  fixed,  on  which  a vast  number  of  unexpired  contracts  have 
been  based,  without  any  protection  to  those  who  must  be  robbed 
by  the  change.  The  people,  it  may  be,  take  the  new  (watered) 
money  in  ignorance  of  the  debasement.  Finding  that  it  bears 
the  same  name  as  the  old,  and  is  authenticated  by  the  seal  of  the 
government,  they  very  naturally  conclude,  till  bitter  experience 
proves  the  contrary,  that  it  has  the  same  value.  Paper  money, 
especially  if  it  be  inconvertible,  though  it  pledge  the  “ faith  of 
the  nation,”  and  wear  the  symbols  of  justice  in  its  face,  furnishes 
peculiar  facilities  for  fraud  and  robbery.  Fair  to  look  at,  insin- 
uating, insidious,  surchanged  with  promises  and  deceit,  it  is  a 
potent  instrument  of  mischief,  “ a gay  deceiver,”  slaying  while 
it  captivates.  There  is  something  in  its  early  and  more  superfi- 
cial effects  which  is  mysteriously  seductive  and  delusive,  and 
quite  bewildering  to  the  popular  mind.  If  a man  wish  to  lead 
astray,  and  befog  an  enthusiastic  person  hopelessly,  he  has  but 
to  ask  his  solution  of  the  money  question. 

The  “ faith  ” spoken  of  and  the  symbols  in  vermilion,  like  the 
promise  before  mentioned,  do  not  impart  the  smallest  value,  mul- 
tiply them  as  you  will.  It  is  sufficient  to  say  they  are  not  con- 
vertible, and  do  not  imply  limitation.  Considered  as  a reason- 
able basis  and  ground  for  confidence,  faith,  pure  and  simple,  cost- 
ing nothing  and  representing  nothing,  is  too  etherial  for  any 
service  in  the  economic  world.  In  one  sense,  it  is  a delusion,  in 
another,  a pit-fall  and  snare. 

Long  experience  has  shown  that  the  precious  metals  have  un- 
equalled advantages  as  the  material  of  money.  Everywhere  are 
they  known,  their  uses  understood,  and  their  good  qualities 
acknowledged.  Manufactured  into  coins,  they  constitute  the 
circulating  medium  of  many  countries,  and  a standard  of  value 
in  nearly  all.  When  uncoined,  passing  by  weight,  not  by  tale, 
they  are  the  only  international  money  recognized  and  employed. 
In  this  form,  they  are  used  as  a fixed  measure  by  which  the  value 
of  any  local  currency  is  determined.  With  their  assistance,  the 
merchant  in  New  York  or  London,  holding  in  his  hand  the  price 
lists  of  his  own  and  of  foreign  countries,  is  able  to  compare  one 
with  another,  and  tell  at  a glance  what  commodities  can  be  ex- 
ported with  a profit,  and  where  they  should  be  taken.  He  can 
also  decide  what  goods  his  ships  can  bring  home  with  advantage, 
and  in  what  markets  they  should  be  bought.  Should  the  foreign 
exchanges,  so  called,  be  disturbed,  he  can  see  whether  gold  and 


38 


silver  will  not  make  a more  lucrative  shipment,  one  way  Or  the 
other,  than  merchandise.  As  every  people  having  a foreign 
trade  must  hold  a stock  of  precious  metal  for  international  uses, 
or  as  a fund  out  of  which  merchants  can  pay  adverse  foreign 
balances,  etc.,  it  is  desirable  that  local  currencies  should,  as  far 
as  possible,  be  metallic.  Where  this  is  the  fact,  the  store  in  a 
country  thus  favored  will  be  so  enlarged  that  the  removal  of  a 
few  million  will  not  cripple  business  by  embarrassing  the  money 
market.  More  than  other  people,  we  of  the  United  States  have 
been  accustomed  to  suffer,  in  the  great  commercial  crises  of  the 
world,  partly  because  our  business  is  done,  even  in  specie-paying 
times,  almost  wholly  with  paper  money,  so  that  when  a moderate 
amount  of  gold  is  wanted  for  exportation  little  can  be  taken 
without  producing  extraordinary  effects — great  scarcity  of  the 
metal,  a rapid  fall  in  the  prices  of  exportable  commodities,  and 
commercial  distress.  This  is  especially  true  when  the  paper  in 
use  is  the  convertible  note  which  is  marvelously  sensitive  to  the 
smallest  unusual  demand  for  specie.  Panic  stricken,  it  retires 
precipitately  to  its  hiding  places,  leaving  the  producing  and 
trading  classes  without  facilities  for  the  transaction  of  business. 
No  doubt  the  laws  requiring  custom-house  duties  and  interest 
on  the  public  debt  to  be  paid  in  coin  have  tended  to  moderate 
the  “ gold  famine  ” when  foreign  exchanges  have  been  adverse. 

Gold  and  silver,  considered  as  metals,  are  commodities.  They 
are  the  product  of  the  industrial  forces,  labor  and  capital,  or  say 
labor.  Toil  and  sweat  are  expended  in  mining,  transporting  and 
fitting  them  for  market.  They  contain  labor  in  a concentrated 
form;  may,  in  truth,  be  called  labor  materialized  and  solidified. 
Labor  is  the  sole  ground  of  their  value,  intrinsic  and  exchange- 
able. Could  they  be  obtained  without  effort,  they  might  be  use- 
ful, but  would  not  have  value.  In  exchange,  they  will  command 
as  much  labor,  say  in  the  form  of  goods,  as  they  themselves  con- 
tain. The  cost  of  production  determines  the  proportion  in  which 
every  industrial  product  shall  be  given  for  others.  A week’s 
work  in  the  form  of  gold  is  the  natural  equivalent  of  a week’s 
work  in  the  form  of  cloth  or  shoes.  The  two  have  equal  value 
in  exchange.  Of  course  I do  not  forget  the  temporary  fluctua- 
tions which  proceed  from  the  altered  relations  of  supply  and 
demand. 

Gold  and  silver  coins  of  known  weight  and  fineness  are  ad- 
mirably fitted  to  perform  the  functions  of  money.  Costing  labor, 


39 


and  always  in  demand,  they  have  a solid  and  permanent  value, 
themselves  being  the  evidence  of  it.  When  taken  in  exchange 
for  goods  or  services,  the  holder  knows  that  he  has  obtained  a 
substantial  equivalent.  In  them  is  stored  up  ready  for  imme- 
diate or  future  use  whatever  labor  or  value  he  may  have  parted 
with.  Connected  with  them  is  no  blandishment,  mystery,  trick 
or  cheat.  Plain  people  can  comprehend  their  office  and  opera- 
tion. They  are  not  dependent  for  their  goodness  on  some  con- 
vertible privilege,  on  the  solvency  of  the  issuers,  on  broken 
pledges,  promises  without  performance,  the  faith  of  the  nation, 
or  on  anything  outside  of  themselves.  The  “nation  ” might  be 
quenched  in  brimstone  without  harming  them.  Their  purchas- 
ing power  is  not  crippled  when  the  government  chooses  to  make 
others  like  them.  Hard  work  alone,  not  the  power  press,  will 
suffice  for  their  production.  They  are  not  of  a bibulous  nature, 
and  cannot  be  successfully  watered,  or  cannot  in  the  same  way 
as  paper  money.  Were  individuals  at  liberty  to  manufacture 
them,  the  makers  could  earn  no  more  than  ordinary  wages,  and 
would  obtain  less  were  the  market  temporarily  overstocked. 
There  is  no  motive  on  the  part  of  any  body  or  any  power  to 
multiply  the  national  coins  to  the  extent  of  depreciation.  Should 
this  be  done,  unwittingly,  the  owner,  finding  them  worth  less  as 
money  than  for  bullion,  would  convert  them  into  the  latter  by 
means  of  the  crucible.  Thus  the  currency  would  be  depleted, 
and  volume  be  made  to  conform  to  intrinsic  and  commercial 
value.  Inflation,  therefore,  as  usually  understood,  with  depre- 
ciation and  its  attendant  evils,  is  impossible.  As  much  may 
be  said  of  contraction.  Should  there  be,  temporarily,  a short 
supply  of  coin,  an  intenser  demand  would  present  sufficient 
inducements  to  augment  the  quantity.  Bullion  would  be  taken 
to  the  mint  for  coinage,  importations  be  stimulated,  and  min- 
ing become  more  profitable  than  before.  In  this  manner,  the 
evil  would  be  steadily  counteracted  and  soon  cured.  A scar- 
city of  money  produced  by  enlarged  population  and  more  extend- 
ed industry  and  trade,  making  needful  a lower  range  of  prices, 
wrould  be  corrected  in  the  same  way,  almost  in  its  inception. 
Thus  is  the  supply  adjusted  to  the  demand,  and  the  accepted 
standard  of  value  preserved  by  a mechanism  which  is  self-regu- 
lating, and  as  certain  in  its  effects  as  the  motives  of  human  con- 
duct. The  acts  involved  are  automatic,  as  it  were,  securing  the 
end  without  special  aim  or  intention  on  the  part  of  the  actors; 


40 


and  no  sooner  does  the  necessity  arise,  and  the  familiar  signals 
are  given,  than  a movement  is  initiated  to  supply  what  is  needed, 
and  forestall  threatened  disorder.  Human  beings,  prompted  by 
the  love  of  gain,  are  instruments,  perhaps  unconsciously,  in  a 
most  important  work — a work  too  nearly  connected  with  the 
great  industrial  concerns  of  a people  to  be  committed  to  heads 
and  hands  less  intelligent  and  energetic  than  those  prompted 
and  guided  by  self-interest. 

The  expression — “ The  supply  of  money  should  be  equal  to  the 
wants  of  trade,”  is  at  least  intelligible,  provided  the  money  re- 
ferred to  be  specie.  It  means  that  the  business  of  a country 
should  have  its  proportion,  and  no  more,  of  the  circulating  me- 
dium of  the  world;  that  unnatural  scarcity  should  be  met  by 
greater  abundance,  and  super-abundance  by  greater  scarcity; 
that  the  volume  should  not  be  changed  arbitrarily  or  capricious- 
ly; that  any  new  demand  growing  out  of  an  enlarged  industry 
should  be  relieved  by  an  ampler  supply;  all  for  the  purpose  of 
preventing  fluctuations  in  the  standard  of  value,  and  of  holding 
prices  at  their  normal  level.  Every  legitimate  demand  for  value 
should  be  satisfied,  but  this  will  be  done  by  virtue  of  the  inevit- 
able law  which  governs  the  movement  of  specie — a movement 
which  may  be  embarrassed  but  cannot  be  helped  by  supervision 
or  outside  interference.  Government,  in  this  matter,  as  in  some 
others,  can  do  nothing  but  blunder.  Its  whole  duty  is  discharged, 
and  its  useful  ability  exhausted  when  it  gives  honest  coins  for 
all  the  bullion  offered.  It  might  as  well  attempt  to  control  the 
tides  as  superintend  the  ebbing  and  flowing  of  the  precious 
metals.  The  tidal  current,  obedient  to  the  slightest  impulses, 
moving  always  from  the  places  where  money  abounds  toward 
those  in  want  of  it,  repelled  in  one  case  and  attracted  in  the 
other,  furnishes  in  all  instances  a natural  remedy,  safe,  prompt  and 
sufficient,  for  unequal  distribution.  This  restless  current,  reach- 
ing every  shore,  arriving  and  departing  in  ceaseless  alternation, 
provides  the  long  sought  and  much  vaunted  elasticity  of  which 
certain  statesmen  and  politicians  are  so  enamoured,  and  which 
they  are  hopelessly  striving  to  impart  to  irredeemable  paper. 
Though  the  supply  of  the  precious  metal  and  consequently  of  coin 
has  reached  its  limit  when  the  cost  of  producing  it  exceeds  its 
value,  this  limit  will  yield  indefinitely  for  the  good  of  all  under 
the  pressure  of  any  new  demand  raising  its  value.  Hitherto,  dis- 
covery and  invention,  bringing  into  use  more  productive  mines 


41 


and  improved  machinery,  have  kept  pace  with  the  enlarged  con- 
sumption of  the  metal,  and  the  enhanced  demand;  and  there  is 
reason  to  believe  that  these  will  prove  sufficient  for  any  new 
emergency.  The  danger  which  is  now  most  threatening  is  that 
of  depreciation  from  the  diminished  cost  of  production.  That  a 
degree  of  this  effect  has  already  been  produced  will,  I think,  be- 
come more  apparent  than  ever  when  the  extraordinary  financial 
influences  now  at  work  shall  have  given  place  to  normal  condi- 
tions. 

I have  said  that  a specie  currency,  unlike  inconvertible  paper, 
offers  no  inducements  to  an  increase  of  volume  by  injecting  into 
it  new  dollars  like  the  old.  Nobody  expends  his  strength  with- 
out an  object,  and  that  object  with  every  person  of  whom  Polit- 
ical Economy  takes  account  is  gain.  Though  the  inflation  (pro- 
perly so  called)  of  a metallic  medium  be  impossible  because 
unprofitable,  there  is  no  inflexible  barrier  to  any  needful  expan- 
sion. The  expansion  and  contraction  which  it  permits  are  con- 
servative and  safe,  giving  it  special  fitness  for  its  chosen  work. 
In  this  regard  and  for  other  qualities,  it  has  far  more  to  recom- 
mend it  than  any  other  currency  yet  discovered  or  invented. 

The  business  of  making  or  issuing  hard  money  of  standard 
weight  and  fineness,  has  no  attractions  for  the  criminal  classes. 
No  man  can  be  cheated  by  it,  or  wheedled  out  of  his  earnings. 
Not  by  its  agency  can  his  savings  or  property  be  confiscated,  or 
transferred  to  others  without  his  consent.  But  there  is  a way, 
now  unfashionable,  of  so  manipulating  metallic  money,  as  to  in- 
flict wrong  and  injustice.  For  the  sake  of  illustration,  suppose 
Congress,  instead  of  enacting  the  legal  tender  law,  had  adopted 
its  principle,  and  concluded  to  experiment  with  the  constitution- 
al currency  then  in  existence,  making  more  dollars  out  of  the 
same  quantity  and  value  of  metal.  In  place  of  continuing  to  is- 
' sue  coins  of  full  weight,  it  might  have  divided  the  pieces,  making 
four  dollars  out  of  two,  at  the  same  time  declaring  the  fragments 
to  be  true  dollars,  “ legal  tender  at  their  face.”  Bating  the  tender 
provision,  this  is  the  method  of  the  counterfeiters,  (they  remove 
the  precious  metal  with  the  drill,  and  fill  the  holes  with  lead,) 
and  would  be  both  in  theory  and  in  fact,  a genuine  inflation — in- 
flation of  the  same  sort  as  that  from  which  we  have  suffered  so 
much  and  so  long.  As  a reward  for  its  ingenuity,  the  govern- 
ment, in  its  straits,  would  have  gained  great  power,  and  placed 
itself  in  a position  to  make  forced  loans,  and  u borrow  without 

6 


42 


interest.”  Receiving  as  now  old  money  for  import  duties,  and 
paying  out  the  new,  it  would  have  bagged  fifty  cents  for  every 
dollar  disbursed.  The  public  creditors  who  were  obliged  to  take 
it  would  have  suffered  no  more  than  those  victimized  by  the 
greenbacks.  As  the  result  of  the  measure,  the  debased  coins 
would  have  become  the  common  currency,  and  prices  have  risen 
say  50  per  cent.  The  man  who  bought  a cow  or  farm  under  the 
old  dispensation,  and  paid  for  it  under  the  new,  would  have  ob- 
tained it  for  half  its  value.  As  happened  during  the  war  and 
subsequently,  property,  to  an  enormous  extent,  would  have  been 
wrested  from  the  industrious  and  provident,  and  given  without 
consideration  to  others,  largely  to  the  spendthrift  class.  Great 
excitement  must  have  been  produced,  and  “ cheap  money  ” have 
become  vastly  popular.  The  rising  prices  would  have  given 
birth  to  a race  of  frantic  speculators,  each  afraid  of  being  last  in 
the  race  for  sudden  wealth.  At  the  close  of  the  war,  many  would 
have  said,  as  they  do  now,  and  as  they  did  in  continental  times 
a century  ago,  that  the  new  money  was  a necessity  of  the  crisis, 
issued  in  conformity  to  the  fundamental  law,  and  indispensable 
to  success,  the  Supreme  Court  of  the  United  States  concurring 
in  the  opinion.  In  conclusion  the  government,  as  in  honor  bound, 
and  disdaining  (seemingly)  to  profit  by  its  own  wrong,  would 
have  paid  its  enormous  debt  in  the  dollars  of  our  fathers — dollars 
having  twice  the  weight  of  those  borrowed.  It  must  do  this  or 
lose  forever  its  ability  to  borrow  again.  When  at  length  reac- 
tion and  a panic  had  come,  some  of  those  caught  in  the  storm,  as 
in  lS^,  would  have  said  in  explanation  that  there  was  not  money 
enough  in  the  country,  that  more  inflation  was  demanded,  and 
that  the  dollar  should  be  again  divided.  Some  Secretary  Rich- 
ardson, probably,  would  have  approved  the  suggestion,  and  at- 
tempted its  reduction  to  practice;  while  a supple  Congress, 
instead  of  striking  down  the  offender,  might  have  winked  at,  and 
then  sanctioned  the  usurpation. 

The  phenomena  above  described  can  in  no  way  be  distinguished 
from  those  of  a paper  money  inflation.  Springing  from  the  same 
cause,  following  in  the  same  order,  and  proceeding  to  the  same 
conclusion,  their  essential  identity  must  be  conceded.  With 
equal  propriety  and  in  the  bitterest  vein  of  irony  could  the  de- 
generate dollars  be  called  “ the  money  of  the  people,”  “ the 
poor  man’s  money,”  etc.  The  iniquity  of  debasing  the  gold  dol- 
lar is  no  greater  than  that  of  degrading  the  paper  dollar,  nor 


43 


is  the  act  more  contemptible  in  itself.  In  both  cases,  the  old 
standard  of  value  is  overthrown,  and  measureless  wrong  and  in- 
justice inflicted. 

There  is,  comparatively  speaking,  one  important  advantage  of 
metallic  over  paper  inflation.  Coins  of  half  weight  cannot  de- 
preciate or  in  any  way  injure  those  of  full  weight.  The  latter 
will  have  as  much  value  as  they  ever  had,  and,  so  long  as  the 
coinage  is  unrestricted,  will  exchange  each  for  two  of  the  former. 
Of  course  they  will  pass  out  of  circulation  when  sufficient  provi- 
sion has  been  made  for  a cheaper  currency.  Nor  will  any  addi- 
tion of  light  dollars  do  damage  to  other  pieces  like  themselves. 
The  last  issues  will  be  worth  as  much  as  the  first,  each  coin  hav- 
ing a purchasing  power  equal  to  the  gold  it  contains.  When 
once  established,  its  value  will  not  fluctuate  from  day  to  day.  It 
is  hard  money  still,  and,  according  to  its  weight,  a truth-telling 
measure,  quite  as  trusty  as  before.  Nor  will  it  command  less  in 
the  market  because  still  cheaper  emissions  have  driven  it  from 
circulation.  In  these  particulars,  the  facts  connected  with  an 
inconvertible  paper  currency  are  profoundly  different.  Every 
dollar  added  to  it  drags  down  all  the  others.  All  are  depreciated 
according  to  a law  already  considered.  As  there  is  no  way  for 
its  escape — nothing  better  into  which  it  may  be  converted — the 
mischief  is  usually  remediless.  Controlled  by  selfishness  and  the 
baser  elements  of  human  nature,  the  tendency  of  such  a currency 
is  invariably  toward  a lower  level  without  reaction  till  the  sure 
and  final  catastrophe  forces  reform. 


IV. 

The  Convertible  Note — Its  Advantages  and 
Defects. 

Specie  is  a costly  currency.  Were  it  used  as  the  sole  means  of 
payment,  all  substitutes  having  been  abolished,  the  amount  of 
labor  and  capital  required  for  its  production  and  renewal  would 
be  vast  almost  beyond  computation.  In  a country  like  ours, 
where  the  industrial  forces  are  not  superabundant,  the  work  of 
providing  it,  even  from  our  own  mines,  would  make  a heavy 


44 


draft  on  the  resources  of  the  people.  Nor  is  its  weight  a matter 
of  small  consideration  in  the  larger  transactions,  so  moderate  a 
sum  as  $225  in  gold  coin  weighing  more  than  a pound  (troy). 
To  promote  convenience  and  economy,  the  convertible  note,  pay- 
able on  demand  in  specie,  has  been  invented,  and  is  now  largely 
used  among  the  more  civilized  nations.  It  is  a great  favorite  of 
the  commercial  classes,  particularly  in  this  country.  Hitherto, 
in  the  United  States,  it  has  been  issued  by  the  banks,  usually 
under  state  laws.  When  the  circumstances  are  favorable,  it  is 
readily  accepted  by ‘the  people  as  money.  Even  when  not  legal 
tender,  if  it  be  made  payable  in  specie  on  demand,  and  the  hblder 
have  unshaken  confidence  in  the  good  faith  and  ability  of  the 
promisor,  experience  has  proved  that  it  will  not  depreciate  as 
compared  with  coin,  and  will  not  be  presented  for  redemption, 
except  in  rare  instances,  mostly  when  the  metal  is  wanted  not  as 
money  but  as  merchandise.  Fittingly  enough  (if  the  distinction 
be  important)  notes  of  this  kind  have  been  called  a credit  cur- 
rency, sometimes  a debt  currency.  Besides  being  money,  they 
are  promises  to  pay  other  money,  and  their  comparatively  stable 
value  depends  on  the  credit  of  those  who  issue  them.  Should 
the  latter  fail,  or  be  suspected  of  insolvency,  the  conditional  con- 
sent which  has  given  them  circulation  is  immediately  withdrawn. 
This  withdrawal  divests  them  of  the  quality  of  money,  and  they 
become  only  private  notes  of  hand — a discredited  asset  against 
an  embarrassed  estate.  Credit  is  their  vital  principle,  and  the 
coin  supposed  to  be  somewhere  waiting  for  the  holders  their  sup- 
port. Unlike  specie  they  possess  no  intrinsic  value,  have  cost 
no  labor,  and  differ  wholly  from  irredeemable  paper.  In  their 
constitution  is  a provision — rather  an  abiding  principle — intended 
to  control  the  issues.  Convertibility  checks  the  supply,  limits 
volume,  hinders  inflation  and  thus  sustains  value.  Their  safety 
is  in  the  self-interest  which  constrains  those  who  for  profit  have 
undertaken  to  furnish  the  circulating  medium,  and  to  make  it 
what  it  pretends  to  be  and  should  be. 

In  quiet  times,  experience  will  determine,  with  sufficient  cer- 
tainty, the  frequency  with  which  convertible  notes  will  be  pre- 
sented for  payment.  When  this  is  known,  practical  rules  may  be 
framed  for  the  guidance  of  the  issuers.  What  proportion  of  coin 
is  required  to  place  credit  on  a firm  basis,  and  to  meet  any  prob- 
able demand  may  be  easily  learned.  Having  provided  itself 
with  the  due  proportion,  a bank  may  prudently  exchange  a cer- 


45 


tain  amount  of  circulating  notes  for  short  business  paper,  or  any 
paper  not  too  long  which  will  be  paid  when  due,  confidently  ex- 
pecting that  the  promised  payments  will  make  seasonable  pro- 
vision for  any  notes  which  may  be  returned  for  redemption.  As 
the  bank  notes  loaned  draw  no  interest,  there  is  an  enduring 
temptation  presented  to  over  issues;  but  the  custom  of  prudent 
borrowers  to  ask  for  no  more  money  than  can  be  usefully  em- 
ployed will  operate  as  a perpetual  curb.  Money  in  hand  yields 
no  profit,  and  none  but  spendthrifts  and  speculators  will  take 
(to  pay  any  thing  for  it)  more  than  they  can  use  to  advantage. 
If  an  unwonted  amount  be  called  for  to  meet  a temporary  and 
special  want,  say  to  “move  the  crops,”  the  theory  is  that  the  ex- 
cess will  be  returned  so  soon  as  the  emergency  is  past — returned 
when  the  additional  paper  discounted  is  taken  up.  Thus  expan- 
sion, whatever  its  limits,  caused  by  the  irregular  perhaps  periodi- 
cal movements  of  business  and  trade,  will  cure  itself.  The  cur- 
rency which  is  required  to  supply  the  permament  wants  of  a 
people  remains  in  circulation,  while  any  which  is  called  forth  to 
meet  a transient  demand  disappears  as  soon  as  its  special  work 
is  done.  It  retires  to  the  vaults  of  the  banks,  and  cannot  find 
its  way  out  till  suitable  work  is  again  provided  for  it.  Thus  in- 
flation by  convertible  notes  is  prevented  without  practical  con- 
version. 

Views  somewhat  like  the  above  are  presented  by  several  wri- 
ters on  monetary  science.  Prof.  Price  in  his  recent  work  on 
“ Currency  and  Banking  ” alledges  that  “ an  inflated  circulation 
of  bank  notes  payable  on  demand  is  a pure  absurdity,  nothing 
better  than  nonsense.”  But  surely  Mr.  Price  forgets  some  things 
with  which  every  one  who  writes  on  this  subject  should  be  famil- 
iar. His  remarks  might  have  the  color  of  truth  were  banks  always 
discreetly  managed;  were  they  never  led  astray  by  cupidity;  did 
borrowers  never  ask  for  money  except  for  their  legitimate  busi- 
ness; did  superfluous  middle  men  never  interpose  between  the 
producer  and  consumer,  buying  up  goods,  and  selling  to  other 
adventurers  at  enhanced  prices,  thus  increasing  artificially  the 
volume  of  trade,  the  aggregate  number  of  the  exchanges,  and 
the  demand  for  the  medium  of  exchange,  or  money.  Were  all 
the  ifs  out  of  the  way,  and  men  of  all  classes  forever  kept  their 
heads  cool,  his  declarations  might  be  sustained,  but,  notoriously 
the  facts  are  otherwise.  Too  easily  may  a speculative  or  infla- 
tion-movement be  initiated  by  circulating  notes  payable  on  de- 


46 


mand.  Let  a bank  of  large  capital  and  influence,  anxious  to 
win  public  favor,  add  to  its  customary  discounts,  loaning  on 
“ accommodation  paper,”  or  on  inferior  security,  or  in  some  other 
way  place  more  of  its  own  notes  in  the  hands  of  the  ardent,  con- 
fiding and  impatient — those  waiting  to  make  ventures — than  they 
have  before  thought  it  safe  to  do,  and  a beginning  is  made.  Not 
often  seen  in  the  market  as  prominent  purchasers,  the  happy  re- 
cipients, thus  equipped,  go  there,  and  with  smiling  faces  and 
defiant  air  bid  against  the  old  buyers,  raising  prices.  So  soon 
as  other  banks  did  the  same  (example  is  contagious),  inflation 
would  have  made  important  progress.  Institutions  having  but 
little  reputation,  but  credit  enough  to  make  their  promises  cur- 
rent could  contribute  largely  to  the  movement,  as  much  in  truth 
as  those  in  better  standing.  The  increased  volume  of  notes,  from 
whatever  source,  would  all  be  absorbed  by  the  enhanced  prices; 
nor  would  they  be  returned  for  redemption  so  long  as  the  specu- 
lative excitement  lasted. 

Or  the  excitement  might  originate  outside  the  banks,  having 
its  commencement  perhaps  in  one  of  those  inward  tidal  impulses 
which  periodically  make  shipwreck  of  reason  and  common  sense, 
and  waken  in  a community  a passion  for  buying,  or  gambling  in 
goods  and  estate,  always  in  the  belief  that  a new  era  is  at  hand, 
that  circumstances  and  the  times  have  changed,  and  that  prop- 
erty will  rise,  making  those  who  shall  be  owners  a week  or  month 
hence  rich.  At  first  not  much  money  or  bank  credit  will  be 
needed,  small  cash  payments,  personal  credit  or  secured  notes 
serving  in  its  stead.  To  set  the  ball  in  motion,  all  that  is  need- 
ful is  to  place  new  purchasers  in  the  market  armed  with  sufficient 
means  of  any  kind  to  bid  effectively.  It  would  not  be  necessary 
they  should  finally  buy.  Striving  to  buy,  or  seeming  to  do  so, 
would  do  as  well,  as  may  be  seen  at  an  auction  sale,  or  among 
the  stock-brokers  in  Wall  street.  Were  no  purchases  made,  the 
movement  would  prevent  those  in  want  from  obtaining  their  in- 
dispensable supplies  except  at  enhanced  prices.  When  so  much 
has  been  done  the  greatest  difficulty  is  overcome.  The  rest  fol- 
lows naturally,  and  if  no  mishap  prevents,  the  result  is  assured. 
Advancing  prices  generate  and  strengthen  speculation,  and  make 
necessary  more  money  for  the  transaction  of  business.  More 
money  sustains  prices,  feeds  the  excitement,  and  prompts  to  more 
buying.  New  emissions  of  circulating  notes  are  required  at 
every  stage  of  the  upward  movement — notes  which  cannot  or 


47 


will  not  be  withdrawn  so  long  as  “ confidence  in  the  future 
(faith  in  false  prophets)  is  unimpaired.  If  a small  class,  suspi- 
cious of  appearances,  sell  out  and  retire,  a more  numerous  one 
steps  to  the  front  and  forces  up  prices  again,  making  needful 
still  more  money,  and  so  on  till  shipwreck  breaks  the  spell.  Be- 
fore 1862,  when  the  convertible  note  was  in  its  glory  in  this 
country,  we  so  frequently  witnessed  the  progress  of  the  juflation- 
lunacy  that  the  events  are  familiar.  We  were  then  on  a specie 
basis,  but  on  every  notable  occasion  the  banks  iawere  ^largely, 
often  ruinously  extended  in  circulation  and  deposits,  the  giddy 
ones  joining  in  the  race  early  with  rejoicing,  the  doubting  and 
more  conservative,  at  a later  period,  perhaps  in  self-defence — I 
speak  here  of  banks  issuing  convertible  notes  without  sufficient 
restrictions. 

It  is  a note-worthy  fact,  explanatory  of  other  facts,  that  specu- 
lative purchases,  when  prices  are  advancing,  put  an  unusual 
amount  of  money  in  the  pockets  of  the  purchasers,  enable  them 
to  control  more  of  the  funds  of  banks  and  individuals,  and  give 
them  additional  power  in  the  market.  By  their  influence  as  bid- 
ders, every  day  increasing,  a commercial  excitement,  once  begun, 
gains  rapid  and  dangerous  headway.  Thus  trade  and  the  indus- 
trial interests  of  the  country,  to  a large  extent,  are  placed  in  the 
hands  of  speculators — a class  often  unfitted  by  habit,  tempera- 
ment and  experience  for  any  responsible  and  independent  position 
in  the  world  of  business. 

Bank  officers  are  in  a position  of  great  influence,  and  can  by 
concerted  action  do  much  to  shape  the  course  of  business,  but 
they  are  not  omnipotent,  are  not  always  discreet,  and  have  the 
longings  of  other  men.  They  are  expected  to  earn  dividends, 
and  the  best  of  them  cannot  resist  the  temptation  to  do  it  in  the 
approved  way.  If  their  customers,  by  reason  of  enhanced  prices, 
stand  in  need  of  more  currency,  they  are  constrained  to  meet  the 
demand.  If  more  money  than  usual  is  offered  on  deposit,  as  there 
will  be  when  more  is  in  circulation,  they  will  thankfully  receive 
it,  and  loan  that  proportion  which  is  deemed  prudent,  paying  out 
their  own  notes,  according  to  custom.  In  this  manner,  perhaps 
unconsciously,  they  are  drawn  into  the  vortex  of  excitement, 
and,  while  engaged  in  a regular  business,  and  performing  only  a 
prescribed  duty,  do  their  part  to  encourage  speculation  and  in- 
flate prices.  Bank  men  should  be  judged  by  the  rules  laid  down 
for  other  people  in  responsible  places,  but  it  should  also  be  re- 


48 


membered  that  their  conduct  draws  after  it  consequences  far 
graver  and  more  extended  than  do  the  acts  of  ordinary  mortals. 
Within  certain  limits,  they  have  in  their  control  the  common 
currency,  the  accepted  medium  of  exchange  and  measure  of 
values.  By  means  of  convertible  notes  and  loans,  they  can,  if 
united,  make  money  abundant  or  scarce,  put  up  or  down  the  rate 
of  interest,  increase  or  reduce  prices,  expand  or  contract  the 
measure  of  value,  plunge  into  or  save  from  bankruptcy,  stimu- 
late or  paralyze  industry,  etc.  Perhaps  it  is  not  quite  sufficient 
to  say  that,  as  a general  rule,  they  are  not  disposed  to  abuse  their 
privileges,  and  that  ambitious  and  irregular  action  is  opposed  to 
the  best  good  of  themselves,  their  stock-holders  and  customers. 
Nor  is  the  feeling  of  insecurity  and  apprehension  at  all  relieved 
by  the  fact  that  other  classes,  strong  in  a financial  sense,  may 
exert  a degree  of  the  same  influence.  Combination  with  power 
is,  in  truth,  a perilous  instrumentality,  capable  of  the  most  varied 
and  grinding  tyranny,  by  whomsoever  employed,  as  we  have  fre- 
quent cause  to  know  and  deplore.  One  of  the  main  objects  of  a 
good  government  is  to  deprive  individuals  and  classes  of  the 
ability  to  do  wrong,  withholding  dangerous  power  even  when 
self-interest  would  be  against  its  abuse. 

For  common  uses,  the  convertible  note  is  the  most  convenient 
and  efficient  form  of  a circulating  medium  pretending  to  have 
an  uniform  value.  It  is  cheap  in  cost,  easily  counted,  light, 
portable  and  comparatively  safe;  a hundred  thousand  dollars 
may  be  carried  about  the  person,  without  exciting  suspicion.  It 
will  do  more  work,  that  is,  it  will  settle  a greater  number  and 
larger  amount  of  business  transactions  in  the  same  time,  with  an 
approach  to  equity,  than  any  other  kind  of  money.  In  the  com- 
bined qualities  of  easy  movement,  celerity  and  complete  adequacy 
as  an  implement  of  the  market,  it  is  without  a rival.  For  heavier 
work  and  perfect  security,  the  check  has  an  important  advantage. 
A check  drawn  against  a deposit  or  bank  credit  is  not  itself 
money,  properly  so  called,  as  before  remarked,  but  an  order  for 
money.  Once  for  all  it  serves  as  a substitute  for  the  latter,  and 
is  seen  no  more.  It  does  not  pass  from  hand  to  hand,  except 
occasionally  in  the  way  of  barter,  but  goes  by  the  shortest  road 
directly  to  the  party  addressed  for  payment.  It  is  however  an 
instrument  of  vast  power,  effecting  by  virtue  of  a few  strokes  of 
the  pen  the  exchange  of  tens  of  thousands.  The  deposits  of 
which  it  is  the  key  have  great  mobility — an  expansive  and  con- 


49 


tractile  power  next  in  rank  to  convertible  notes,  with  advantages 
and  disadvantages  too  conspicuous  to  be  overlooked.  In  specie- 
paying times  they  are  themselves  convertible  into  coin  (now  into 
greenbacks),  at  the  pleasure  of  the  depositor,  and  at  the  present 
day  usually  constitute  the  greatest  share  of  the  immediate  liabili- 
ties of  the  banks.  They  grow  out  of  fresh  discounts,  or  the  daily 
cash  balances  of  merchants  and  business  men,  and  are  paid  in 
money  or  by  ledger-transfers.  In  most  cases  paying  no  interest, 
there  is  an  unquenchable  desire  for  their  accumulation,  and  an 
inducement  to  loan  them  in  too  great  proportion,  or  on  inadequate 
security.  When  this  is  done,  enhanced  prices,  an  increased 
volume  of  business,  speculation,  and  all  the  phenomena  of  infla- 
tion, daily  becoming  more  apparent,  are  produced  or  promoted. 
When  more  checks,  doing  the  work  of  money,  are  offered  in  the 
market,  prices  are  enhanced,  and  the  currency  as  effectually  de- 
preciated as  it  would  be  by  the  issue  of  more  paper  dollars. 
Under  these  circumstances,  when  the  reserves  or  cash  resources 
are  much  reduced,  having  gone  into  bills  discounted,  as  always 
happens  in  a time  of  expansion,  if  a sudden  call  be  made  by  timid 
depositors  looking  out  for  rough  weather,  some  of  them  in  want  of 
gold  for  exportation,  a stringency  followed  perhaps  by  tumbling 
prices  and  a crippled  business,  is  the  result.  Though  an  increase 
of  loans  may  proceed  a certain  length  without  the  aid  of  more 
currency,  the  enlargement  is  greatly  facilitated  and  extended  by 
the  issue  of  additional  notes.  A restricted  supply  of  the  latter 
not  only  embarrasses  the  loan  market,  but  is  a constant  drag  on 
the  upward  tendency  of  prices — squeezes  the  life  out  of  specula- 
tion; and  it  is  doubtful  whether  large  progress  could  be  made  in 
a skyward  direction  whilst  the  restriction  continued. 

In  succeptibility  to  impressions,  and  the  power  of  prompt  ex- 
pansion and  contraction,  called  elasticity,  the  convertible  note 
ranks  first,  deposits  controlled  by  checks  second,  and  specie  third. 
Any  needful  qualities  which  the  two  former  may  have,  as  meas- 
ures of  value,  are  due  to  their  convertibility  on  demand  into  the 
latter.  They  are  exceedingly  flexible.  With  headlong  haste 
they  yield  to  pressure,  and  adjust  themselves  to  the  oscillations 
of  industry  and  trade.  But  these  qualities,  so  liberally  provided, 
are  not  easily  controlled.  They  are  indispensable,  or  nearly  so, 
but  the  question  is  whether,  in  the  cases  referred  to,  they  do  not 
exist  in  excess;  whether  the  attendant  evils  do  not  transcend  and 
over-balance  the  good.  So  far  as  the  convertible  note  is  con- 

7 


50 


cerned,  my  conviction  is  that  the  evil  preponderates.  The  rea- 
sons for  this  may  in  part  be  gathered  from  what  has  already  been 
said.  The  remarkable  flexibility  of  the  note  is  due  to  a precarious 
and  explosive  element,  credit,  which  is  its  basis  and  support,  and 
which  in  critical  times,  when  confidence  is  wanting,  is  not  suffi- 
ciently stable.  When  the  skies  are  particularly  bright  and  en- 
terprise needs  curbing,  it  yields  to  the  slightest  impulse,  and 
proffers  aid  without  stint;  but  in  seasons  of  storm  when  the  strain 
is  applied,  breaks  down  utterly,  or  retires  to  the  caves  whence 
it  came.  When  the  people  are  crying  lustily  for  more  money,  a 
forced  bank  contraction  deprives  them  suddenly  of  that  which 
they  before  had.  It  is  a note-worthy  fact  that  panic  comes 
at  or  near  the  time  when  confidence  is  greatest,  when  expan- 
sion has  reached  its  farthest  limit,  and  monied  institutions  are 
least  able  to  meet  unaccustomed  calls.  In  their  haste  to  cancel 
their  obligations  and  escape  bankruptcy,  the  public  is  left  almost 
without  a currency.  A severe  stringency,  under  the  pressure  of 
which  no  business  can  long  live,  is  the  result.  Were  the  common 
currency  gold  and  silver  coin  this  could  not  happen,  or  could 
not  to  the  same  extent.  The  holder,  though  confidence  should 
fail  in  everything  else,  would  not  lose  his  faith  in  that.  It  is  his 
own  labor  and  sweat  solidified  and  stamped.  Stable,  storm-proof 
as  it  were,  it  needs  not  to  be  converted,  and  will  be  as  good  to- 
morrow as  to-day.  In  a time  of  upheaval  the  banks  are  crippled 
by  vain  efforts  to  supply  it  in  exchange  for  their  own  (perhaps 
distrusted)  notes,  and  thus  sustain  their  tottering  credit.  Before 
the  war,  in  periods  of  alarm,  the  conversion  of  one  paper  dollar 
into  specie  compelled  a contraction  of  five  or  ten  dollars  in  notes 
and  discounts. 

In  quiet  seasons,  when  confidence  and  credit  are  not  wanting, 
the  convertible  note  makes  a good  enough  circulating  medium; 
but  it  fails  when  financial  excitement  has  taken  hold  of  the  peo- 
ple. The  very  qualities  which  have  most  recommended  it  are 
sources  of  danger,  and  weighty  reasons  for  its  condemnation. 
As  we  have  seen  it,  it  is  too  mercurial;  has  an  excess  of  mobility, 
and  yields  too  readily  to  the  forces  which  determine  expansion 
and  contraction.  So  quietly  does  it  come  forth;  so  little  present 
disturbance  in  the  money-market  does  it  occasion,  and  so  con- 
venient is  it  for  all  parties  in  interest  that  it  is  largely  used  to 
foster  speculation,  and  promote  schemes  which  should  be  nipped 
in  the  bud.  Were  metallic  money  employed  in  its  stead,  the 


51 


stringency  produced  by  any  new  and  factitious  demand  would 
tend  to  check  the  movement,  and  save  the  unwary.  Theoreti- 
cally, the  over-issue  of  notes  is,  in  any  contingency,  prevented 
or  cured  by  a call  for  their  conversion  into  coin,  but  practically 
this  check  is  not  applied  in  season  to  prevent  disaster.  The  re- 
dundant paper,  in  truth,  is  rarely  presented  for  redemption  till 
confidence  and  credit  have  received  a shock,  and  then  the  dam- 
age has  been  wrought,  and  its  presentation  would  only  aggravate 
the  evil.  The  remedy  for  excess — one  of  the  “ heroic  ” sort — is 
reasonably  sure  if  used  efficiently  and  with  judgment  when  the 
excitement  needs  curbing,  but  will  extinguish  the  little  vitality 
left  if  pushed  in  the  stage  of  panic  and  collapse. 

A reasonable  and  effectual  check  to  expansion  by  the  over-issue 
of  convertible  paper  is  not  furnished  by  any  of  the  known  systems 
of  redemption.  No  doubt  voluntary  arrangements  among  the 
banks  themselves  designed  to  secure  this  may  be  of  signal  ser- 
vice. The  old  Suffolk  system,  for  instance,  did  much  excellent 
work.  It  compelled  the  banks  of  New  England  to  redeem  their 
notes  at  the  designated  agency  with  Boston  or  New  York  funds. 
Each  bank  received  the  bills  of  every  other,  and  forwarded  them 
at  short  intervals  to  Boston,  getting  their  own  in  return.  The 
device  tended  to  keep  the  circulation  of  each  institution  within 
proper  limits,  and  to  prevent  encroachments  on  territory  natur- 
ally belonging  to  others.  Thus  was  given  to  six  states  a more 
uniform  and  equal  currency  than  had  been  known  elsewhere,  on 
so  considerable  a scale,  in  this  country.  But  the  redemption 
which  the  system  secured  was  a paper  redemption.  From  first 
to  last,  not  a dollar  of  coin  appeared  in  any  of  the  large  pay- 
ments which  the  plan  required.  The  chief  end  sought,  however, 
was  obtained.  Practical  convertibility,  not  into  specie  but  into 
New  York  or  Boston  funds,  was  rigidly  enforced.  Individual 
banks  of  the  “ free  and  easy  ” sort  were  restrained  in  their  issues, 
and  no  one  could  go  much  faster  or  further,  in  this  kind  of  dis- 
sipation, than  the  others.  But  inflation,  when  all  moved  together, 
and  in  concert  with  the  cities  named,  was  not  prevented.  If 
New  York  sneezed,  every  bank  in  New  England  felt  the  vibra- 
bration  and  sneezed  too.  Clearly  enough,  the  inadequacy  of  the 
system  was  illustrated  and  proved  by  the  events  which  preceded 
the  misfortunes  of  1837,  1839,  184V  and  1857,  when  the  Suffolk 
system  was  in  full  operation.  Except  when  comparing  it  with 
others,  the  enconiums  so  liberally  bestowed  on  it  by  Mr.  Carey, 
Mr.  Price  and  others  are  not  deserved, 


52 


The  clearing  house  systems  of  our  larger  cities,  at  the  present 
time,  are  similiar  in  plan,  objects  and  operation  to  the  Suffolk 
scheme.  They  differ  however  in  one  particular.  Balances  are 
paid  in  legal  tender  money  (now  treasury  notes),  or  in  govern- 
ment certificates  which  will  command  it. 

Nominal  convertibility,  then,  aided,  it  may  be,  by  systematic 
redemption  in  paper,  gives  no  sufficient  or  reasonable  protec- 
tion against  the  evils  of  undue  expansion.  The  latter  may  go  on, 
not  indefinitely,  but  to  a disastrous  length  in  spite  of  the  safe- 
guards which  theory  has  pronounced  ample.  Practically,  the 
convertible  note  system  provides  no  check  which  is  active  at  the 
important  period  when  events  are  most  easily  shaped  or  controlled. 
When  prices  have  advanced  largely,  and  speculation  is  rampant; 
when  importations  have  been  stimulated  by  extravagance  and  a 
rising  market;  when  the  precious  metals,  repelled  by  cheaper 
money,  have  taken  passage  to  other  lands,  and  a foreign  debt 
been  contracted  which  promises  will  no  longer  pay;  then  for  the 
first  time,  the  “ convertible  privilege,”  intended  as  a check,  is 
thought  of  as  a means  of  relief — a refuge  from  the  storm.  Just 
when  the  banks  are  most  expanded,  and  consequently  nearly 
helpless,  depositors  and  bill-holders  call  for  specie,  first  to  supply 
the  foreign  demand,  then  because  suspension  or  something  worse 
is  apprehended.  A sharp  contraction  is  required,  loans  are  re- 
fused, confidence  is  destroyed,  and  panic  like  a hideous  spectre 
stalks  abroad.  With  the  destruction  of  credit,  the  convertible  note 
proves  a broken  reed  having  for  the  moment  little  to  support 
it.  To  supply  an  indispensable  want  however,  it  will  continue 
in  circulation,  proving  when  attainable  satisfactory  as  a medium 
of  exchange,  but  quite  uncertain  as  a measure  of  value. 

In  a time  of  financial  anarchy,  it  is  important  that  the  money 
of  a people  should  have  a solid  value,  and  be  as  far  removed  as 
possible  from  the  hazzards  of  a tottering  credit  system.  Where 
coin  is  used  as  the  common  currency,  there  is  one  thing  at  least, 
and  that  more  active  and  influential  than  any  other  as  a regula- 
tor and  conservator,  in  which  confidence  cannot  be  shaken.  Its 
presence  is  capable  of  doing  much  to  calm  apprehension — to  con- 
vince the  scared  multitude  that  not  all  is  rottenness  and  illusion, 
notwithstanding  appearances. 

In  order  to  arrest  a speculative  excitement,  the  sure  forerun- 
ner of  panic  and  bankruptcy,  the  phrensy  should  be  treated  in 
its  first  stage,  before  it  has  gained  momentum  enough  to  make 


53 


interference  futile  or  dangerous.  At  that  stage,  when  prices  are 
beginning  to  stiffen,  and  all  kinds  of  business  are  becoming  mor- 
bidly active  and  speculative,  it  is  comparatively  easy  to  break 
up  the  fever,  and  restore  trade  to  its  normal  proportions.  This 
is  most  conveniently  done  through  the  intervention  of  money — 
a kind  of  money,  acting  automatically,  which  will  resist  steadily 
but  firmly  the  enhanced  and  enhancing  prices  which  are  firing 
the  popular  mind.  Of  that  kind  is  specie.  It  has  a fixed  rela- 
tion to  other  things  the  disturbance  of  which  is  the  evidence  of 
disorder  and  impending  reverses.  A gold  dollar  will  naturally 
exchange  for  as  much  labor  as  itself  contains  whether  the  latter 
be  put  into  hardware,  crockery  or  other  goods.  When  it  will 
command  less  of  all  commodities  whose  cost  has  not  been  in- 
creased, in  other  words  when  prices  have  generally  risen,  some- 
thing is  the  matter,  and  health  and  safety  can  never  return  till 
the  normal  relation  is  restored.  As  already  suggested,  the  con- 
vertible note  offers  little  resistance  to  this  upward  movement — 
the  true,  proximate  and  sufficient  cause  of  every  financial  tem- 
pest. But  specie  has,  in  time  of  need,  the  necessary  degree  of 
rigidity.  It  will  yield  readily  enough  to  the  wants  of  legitimate 
business,  but  not  suddenly  and  largely  to  meet  an  artificial  or 
fictitious  pressure.  It  cannot  be  extemporized;  cannot  be  ground 
out  to  order  by  a paper  mill.  Labor  and  capital  are  required  for 
its  production  or  purchase,  and  it  may  be  necessary  to  bring  it 
from  a long  distance.  While  the  adventurer  is  impatiently  wait- 
ing for  it,  pinched  as  he  is  by  a stringent  money-market  caused 
by  the  unaccustomed  demand,  his  courage  is  liable  to  fail  him,  a 
wholesome  consciousness  that  he  has  been  deluded  taking  its 
place.  Nothing  so  effectually  chills  the  ardor  of  a rampant  spec- 
ulator as  a limited  supply  of  money.  It  injures  his  credit,  forces 
him  to  sell  before  he  intended,  causes  a general  shrinkage  of 
values,  and  thus  dissipates  his  cherished  hopes  of  sudden  wealth. 
Men  of  this  class  are  always  opposed  to  contraction,  and  in  favor 
of  that  kind  of  money  which  permits  immediate  and  indefinite 
expansion. 


54 


V. 

State  Banks-Now  the  time  to  get  ready  for 
Resumption. 

In  my  remarks  on  convertible  notes,  I have  had  in  view  those 
used  in  this  country  previous  to  the  late  war,  having  special  re- 
ference to  the  better  of  that  class  which  were  issued  by  the  banks 
of  New  England.  Practically,  there  was  no  limitation  in  the 
amount  except  that  which  a self-imposed  system  of  redemption 
enforced.  The  law  requiring  payment  on  demand  in  specie  had 
little  effect  except  as  a desperate  and  impossible  remedy  in  ex- 
treme cases.  When  once  the  provision  enjoining  a small  legal 
tender  reserve  “ in  coin  or  bullion  ” had  been  complied  with,  it 
inspired  no  terror,  and  imposed  no  restraints.  In  Connecticut, 
this  reserve,  “ not  less  than  one-tenth  of  the  circulation,”  was  to 
be  “ kept  in  the  vaults  of  the  bank,”  the  penalty  for  using  it  for 
any  object  whatever  being  one  hundred  dollars  per  week.  Nat- 
urally enough,  it  was  considered  as  so  much  idle  capital,  un- 
available for  any  solvent  purpose,  and  making  needful  a more 
profitable  use  of  the  resources  which  were  left.  The  banks,  as 
they  do  now,  depended  for  individual  safety  on  the  goodness  of 
their  bills  receivable,  and  favorable  balances  in  their  dealings 
with  each  other.  Those  which,  when  the  daily  or  weekly  settle- 
ment was  made,  were  creditors,  had  reason  to  think  themselves 
sound  and  safe,  while  habitual  debtors  gave  evidence  of  weak- 
ness. Nor  am  I prepared  to  deny  that  the  method  which  placed 
an  institution  on  the  creditor  side  in  the  way  of  business  was 
good  banking;  but  the  system  permitted  great  evils  and  invited 
abuses,  as  already  explained.  A single  very  large  and  strong 
bank,  inexorable  in  its  demands  and  impelled  by  its  fears,  could, 
without  endangering  its  own  solvency,  cripple  half  a dozen 
others  which  had  impaired  their  resources  by  extraordinary  ef- 
forts for  the  relief  of  their  customers  and  the  public.  This  exer- 
cise of  power  by  one  over  another,  in  the  last  panic,  was,  among 
themselves,  measurably  prevented  by  the  associated  banks  in 
New  York  city — prevented  by  expedients  which  enabled  the 
weaker,  at  some  cost,  to  use  thtir  unquestioned  assets,  for  the 
moment  unavailable*  in  the  settlement  of  balances, 


55 


But  when  1 think  of  the  deplorable  evils  growing  out  of  our 
inconvertible  and  depreciated  currency,  and  its  possibilities  for 
mischief;  its  volume  and  consequently  its  value  depending  on  a 
majority  vote  of  a fickle,  inconsiderate  and  party-shacked  Con- 
gress, lam,  for  the  moment,  disposed  to  look  complacently  on  the 
old  state  bank  system  with  its  multiplied  abuses — the  convert- 
ible notes  it  authorized,  and  the  flood  of  small  bills,  (“  wild  cat,” 
“ red  dog  ” and  the  like,)  often  at  a heavy  discount  in  the  cen- 
tral markets.  Nor  would  I speak  with  too  much  severity  of  the 
scanty  stores  of  specie,  the  exhilirating  expansions,  spasmodic 
contractions,  and  periodic  disruptions,  the  succession  of  events 
reminding  one  of  fever  and  ague  with  endless  repetition.  Of 
this  system  it  may  be  said  that,  whatever  its  short  comings,  it 
kept  in  sight,  if  not  within  reach,  the  constitutional  standard  of 
value,  and  showed  by  signals  intelligible  to  the  observing  when 
we  had  departed  from  it.  It  did  not  wipe  out  contracts,  alter 
the  terms  of  a bargain,  strip  individuals  of  their  natural  rights, 
make  rags  legal  tender,  confiscate  property,  or  sanction  injustice 
and  oppression.  The  injury  it  could  inflict,  though  not  incon- 
siderable, was  limited  and  measurable.  Periodically  and  infalli- 
bly, about  once  in  a decade,  usually  after  a financial  convulsion, 
it  brought  us  back,  through  much  tribulation  and  the  greatest 
sacrifices,  to  the  standard  we  had  left.  No  doubt  its  instability 
tended  to  weaken,  but  it  did  not  obliterate  the  moral  sense.  It 
did  not  rear  up  and  sustain  classes  of  public  plunderers,  official 
thieves,  swindlers,  and  criminals  of  every  grade  to  be  compared 
in  adroitness,  depravity  and  audacity  with  those  of  our  green- 
back era.  I imagine  that  the  better  generation  which  lived 
twenty  years  ago  would  not  have  endured  patiently  for  more 
than  fourteen  years  a currency  depreciated  from  sixty-five  to  five 
per  cent.,  and  never  at  rest.  A needed  reform  in  money  matters, 
in  consequence  of  worse  morals,  seems  now  far  more  difficult 
than  it  would  have  been  then. 

I am  aware  that  the  convertible  note  has  the  confidence  of 
many  practical  bankers,  and  distinguished  writers  on  monetary 
science.  To  a notable  extent,  it  is  their  ideal  of  a perfect  cur- 
rency, having  as  a medium  of  exchange  unequalled  advantages, 
as  a measure  of  value,  reasonable  certainty.  In  their  view,  the 
evils  of  our  present  system — depreciation,  inflexibleness  and  un- 
certainty— are  all  due  to  inconvertibility,  and  would  be  corrected 
by  a redemption  in  coin.  The  more  pressing  of  the  evils  com- 


56 


plained  of  would,  no  doubt,  be  removed  by  the  measure  proposed, 
but  that  alone  would  not  complete  the  work  necessary  to  be  done. 

Having  reached  specie  payment,  what  shall  be  done  with  the 
greenbacks  ? Shall  they  be  withdrawn  from  circulation,  or  will 
the  issue  be  continued  in  the  form  of  treasury  notes  payable  on 
demand  in  coin?  To  say  nothing  of  constitutional  right,  com- 
paratively few,  I think,  will  contemplate  with  satisfaction  any 
permament  legislation  authorizing  the  government  to  supply  the 
paper  money  of  the  country.  Till  our  rulers  can  discharge  better 
the  functions  necessary  to  the  existence  of  the  republic,  it  will 
not  be  wise  to  impose  on  them  more  difficult  and  important  duties 
not  essential  to  the  public  welfare,  and  which  may  better  be 
trusted  to  private  hands.  The  paltry  sum  to  be  saved  in  interest 
would  be  no  sufficient  consideration.  Instead  of  multiplying  the 
responsibilties  and  extending  the  powers  of  the  general  govern- 
ment, the  remaining  time  of  the  present  century  should  be  oc- 
cupied in  restricting  and  more  clearly  defining  both.  War  and 
currency  dissipation  have  introduced  abuses  and  encouraged 
practices  which  cannot  be  corrected  in  less  than  a quarter  of  a 
century  of  hard  well-directed  work.  But  if  we  must  have  green- 
backs for  money,  let  them,  by  all  means,  be  irredeemable  and 
legal  tender,  the  volume  to  be  fixed  irrevocably  by  constitutional 
amendment.  Thus  a cheap,  “ non-exportable  currency  for  the 
people,”  would  be  supplied — one  which,  if  limited  in  its  amount, 
could  be  maintained  at  the  specie  level.  If  no  more,  say,  than 
three  hundred  million  were  allowed,  and  this  were  the  only  paper 
money  permitted,  there  would  be  a large  demand  for  coin  to 
make  up  the  deficiency.  Thus  we  should  have  a circulating 
medium,  part  paper  and  part  metal,  having  as  much  stability  in 
value  and  flexibility  in  volume  as  if  it  were  all  specie.  It  would 
be  self-regulating— fitted  by  the  slowly  yielding  qualities  of  its 
metallic  element  to  conform  to  the  ever-changing  condition  of 
the  country  and  of  business.  The  power  of  self-adjustment  would 
of  course  depend  wholly  on  the  last  named  element — an  element 
which  should  be  proportianally  large  enough  to  permit  without 
disorder  all  needful  contractions.  Under  a system  of  this  kind, 
the  currency  in  use  would  not  be  curtailed  by  the  exportation  of 
a few  millions  in  gold  except  to  the  extent  of  the  shipment.  It 
would  be  placed  beyond  the  reach  of  unwise  legislation,  and 
could  not  be  manipulated  by  wily  politicians.  It  might  not  sat- 
isfy the  dreamers  and  schemers  in  financial  science,  or  the  specu- 


57 


lators  in  business,  or  the  many  who  would  be  richer  if  money 
were  of  less  value;  but  it  would  encourage  industry  and  thrift, 
promote  justice  and  honesty,  and  improve  the  morals  of  all 
classes. 

In  case  specie  payment  should  be  resumed,  and  legal  tenders 
finally  retired,  the  question  will  be  asked:  Shall  our  present  na- 
tional banking  system  be  perpetuated  ? Resting  on  a coin  basis, 
it  would  be  far  preferable  to  the  old  state  system,  and  better 
probably  than  any  other  having  a chance  for  adoption,  or  which 
would  now  be  tolerated.  It  should  be  free,  the  circulation 
abundantly  secured,  the  redemption  agency  continued,  an  am- 
pler reserve  than  now  enforced,  and  small  bills — those,  say,  un- 
der fifty  dollars — suppressed.  The  last  important  provision 
would  bring  the  precious  metals  into  general  use,  and  perma- 
nently increase  our  stock  for  exportation  and  other  purposes. 
As  the  convertible  note  is  least  able  to  furnish  assistance  when  as- 
sistance is  most  needed;  and  as  the  distress  caused  by  the  attempt 
to  redeem  it,  in  a time  of  peril,  largely  outweighs  the  relief 
which  the  specie  thus  obtained  affords;  it  is  obvious  that  when 
gold  is  wanted  to  meet  a foreign  or  domestic  demand,  help  should 
not  be  looked  for  in  that  quarter.  It  is  true  that  inconvenient 
contraction  is  produced,  when  much  coin  is  withdrawn  directly 
from  the  circulation,  but  the  contraction  is  equal  only  to  the 
metal  removed;  while  if  the  same  amount  be  taken  from  the 
banks  by  means  of  convertible  notes,  a much  larger  and  more 
embarrassing  contraction  follows.  This  comes  of  an  earnest  en- 
deavor on  the  part  of  the  institutions  named  to  protect  their  van- 
ishing and  always  scanty  reserves,  and  thus  maintain  their  sol- 
vency. To  do  this  they  must  refuse  discounts,  retain  all  their 
own  notes  paid  in,  and  in  every  way  diminish  promptly  their  lia- 
bilities. 

With  the  reforms  suggested,  we  should  have  a better  currency 
than  we  ever  had  before — one  certainly  which  could  be  endured 
till  the  close  of  the  century.  Convertible  notes  might  still  work 
mischief  in  times  of  speculative  excitement  by  yielding  too  read- 
ily to  factitious  demands,  but  their  power  would  be  limited  by 
difficulty  of  attainment.  When  the  banks  are  required  to  pledge 
United  States  bonds  to  secure  ultimate  redemption,  and  are  suffi- 
ciently taxed  for  their  issues,  they  will  be  employed  somewhat 
sparingly.  Panics  too  might  be  expected,  though  these  would 
not  be  as  severe  or  destructive  under  a conservative  system  of 
banking,  and  rigid  supervision. 


8 


58 


It  should  be  observed  that  bank  notes  secured  by  pledges 
of  undoubted  stocks  are  much  inferior  in  flexibility  to  those 
which  may  be  issued  without  legal  and  practical  conditions  or 
restrictions — are  inferior  because  the  system  provides  a check  to 
the  emission  of  circulating  notes  without  capital.  Under  such 
a system  a few  aspiring  individuals  cannot  establish  a bank,  emit 
bills  for  circulation,  and  inflate  the  currency  without  a surer 
foundation  than  pretension  without  the  means  of  payment.  Con- 
sequently, in  times  of  wild  excitement  when  the  demand  for  more 
money  is  pressing,  money  cannot  be  supplied  with  sufficient 
promptness  or  freedom  to  satisfy  the  restless  crowd  of  speculators. 
Certain  fast-going  institutions,  already  much  extended,  may  wish 
to  do  it,  but  they  cannot  “put  up”  the  securities,  while  those 
which  have  the  ability  to  do  so  are  usually  suspicious  and  con- 
servative, slow  to  act  and  fearful  of  getting  hurt.  This  prac- 
tical conservatism,  voluntary  or  constrained,  hinders  and  delays 
expansion,  though  it  may  at  length  give  way  to  outward  pres- 
sure. Whatever  the  final  result,  it  will,  for  a short  period  at 
least,  prove  a barrier  to  advancing  prices,  a discouragement  to 
speculation,  and  do  what  it  can  to  quench  the  rising  phrensy.  If 
a financial  catastrophe  be  not  averted,  its  violence  will  be  tem- 
pered. 

There  is  another  reason  why  the  secured  currency-note  is  bet- 
ter than  the  unsecured.  In  a panic,  confidence  in  its  soundness, 
considered  as  the  evidence  of  property  or  value,  is  not  easily 
shaken,  as  proved  by  experience  in  the  fall  of  1873.  Nor  will 
the  ignorant  and  incredulous — those  having  no  special  use  for 
specie — be  so  impatient  for  its  conversion.  Could  they  be  con- 
vinced that  the  bill-holders  would  not  be  losers  though  the  banks 
should  all  fail,  their  hot  haste,  ending  in  a disasterous  “run,” 
would  give  place  to  reason  and  common  sense. 

The  present  is  the  most  favorable  time  for  a return  to  specie  pay- 
ment since  the  period  which  immediately  followed  the  war.  The 
amount  of  domestic  indebtedness  is  much  reduced,  and  the  class 
to  be  injured  by  any  possible  contraction  of  the  currency  is 
smaller  than  it  has  been  for  many  years,  or  than  it  will  be  after 
business  revives.  Prices  have  fallen  heavily,  so  that  many  things 
are  as  low  as  in  1860.  The  evils  that  were  anticipated  as  the 
effect  of  resumption  are  already  upon  us,  and  whatever  suffer- 
ing has  been  endured  is  a contribution  to  its  cost,  which,  if 
properly  improved,  need  not  be  again  exacted.  If  there  were 


59 


reasons  for  opposing  the  movement  in  former  years,  they  have 
little  force  now.  Millions  of  greenbacks  and  national  bank  notes, 
at  present  useless  for  want  of  employment,  might  be  cancelled 
without  any  disturbance  of  the  money-market.  Not  as  much 
curreney  would  be  required  for  the  restored  trade  of  the  country 
as  was  in  use  at  the  time  prices  were  higher.  When  its  vol- 
ume had  been  somewhat  reduced,  followed  promptly  by  appre- 
ciation, every  paper  dollar  removed  would  be  replaced  by  a gold 
dollar,  the  whole  having  the  same  value  and  efficiency  as  before. 
“ The  tools  of  trade,”  so  called,  would  not  be  taken  from  the 
people,  but  a substitution  in  part  made,  those  of  better  quality 
taking  the  place  of  the  discarded  variety.  Labor,  even  at  the 
present  rates,  would  be  more  liberally  rewarded  than  before  the 
panic;  that  is,  the  wages  received  would  buy  more  bread,  meat, 
clothing,  shelter  and  luxuries  than  previous  to  the  tornado  of 
1873.  Business,  when  it  returned,  would  be  natural  and  healthy, 
and  comparatively  steady  and  durable.  The  numerous  race  of 
middle  men  which  sprang  into  existence  with  the  greenback, 
placing  themselves  between  the  producers  and  consumers  and 
tolling  both  classes,  would,  to  a large  extent,  find  their  occupa- 
tion gone,  and  perhaps  be  compelled  themselves  to  become  pro- 
ducers. 

It  is  often  contended,  sometimes  by  well  meaning  persons,  that 
specie  resumption  may  be  best  secured,  and  greenbacks  be  made 
equal  to  gold  by  measures  which  will  “ promote  the  industries 
of  the  country,”  and  restore  business  to  its  former  activity;  but 
industry  and  business  have  no  tendency  to  increase  the  value  of 
the  accepted  dollar  more  than  they  have  to  augment  the  length 
of  the  accepted  yard-stick.  Both  serve  to  measure,  the  products 
of  labor,  and  are  not  less  or  more  perfect  because  those  products 
are  sold  with  difficulty,  and  labor  is  unemployed.  Ten  years 
ago,  when  trade  was  brisk,  greenbacks  were  far  more  depreciated 
than  they  have  been  at  any  time  during  the  last  three  years  of 
stagnation.  The  difficulty  with  our  paper  money  is  this:  it  is 
short  in  measure,  is  at  the  mercy  of  the  politicians,  and  has  no 
certain  value.  With  it  we  cheat  one  another,  and  by  its  influ- 
ence have  become,  to  a notable  extent,  a nation  of  gamblers. 
The  evil  will  not  cure  itself;  nor  shall  we  “ grow  up  ” to  specie 
payment.  Legislation  is  required,  at  least  enough  of  it  to  re- 
move the  great  barrier  to  resumption — -the  legal  tender  law. 

Should  business  revive  before  anything  decisive  has  been  done 


60 


to  forward  resumption,  the  arguments  now  urged  against  it  would 
be  greatly  strengthened.  The  class  of  objectors  would  obtain 
earnest  converts  among  those  unwilling  to  contend  with  new 
causes  of  disturbance — causes  which  might  put  to  hazzard  the 
opening  prospect  for  better  times.  A currency-reform,  begun  at  a 
period  when  business  men  were  successfully  struggling  to  repair 
their  shattered  fortunes,  and  drawing  after  it  consequences  which 
could  not  be  forseen,  would  be  suspected  and  resisted.  Those 
who  lead  might  admit  its  importance,  but  would  probably  desire 
to  put  off  action  to  “ a more  convenient  season.”  Should  the 
present  opportunity  pass  unimproved,  it  is  most  likely  that  anoth- 
er decade  would  go  by,  and  another  financial  crisis  have  culmi- 
nated before  the  public  mind  could  be  again  turned  toward  re- 
sumption. If  there  be  now  those  who  would  procrastinate  when 
the  reasons  for  immediate  action  are,  viewed  by  the  intelligence 
alone,  overwhelming,  the  do-nothings  and  obstructors  will  be 
numerous  when  seeming  prosperity,  attended  by  rising  prices 
and  greenback-depreciation,  again  returns. 

The  best  good  of  a long  suffering  people  requires  that  a fixed 
policy  on  the  money-question  should  be  forthwith  adopted  and 
accepted;  and  as  nearly  all  agree  that  paper  and  specie  ought  to 
be  equal  in  value,  immediate  steps  should  be  taken  which,  in  due 
time,  will  make  them  so.  If  it  be  admitted  that  the  volume  of 
the  currency  determines  its  value,  we  have  at  all  times  the  means 
to  secure  equality,  and  no  excuse  for  delay.  N othing  more  surely 
hinders  industry,  and  discourages  enterprize  than  uncertainty. 
No  evil  is  so  much  feared  as  that  which  is  hidden,  or  seen  dimly 
through  the  mist  of  doubt.  The  worst  policy,  if  it  be  stable,  is 
scarcely  mor6  injurious  than  a vascillating  one.  The  business 
man  is  always  watching  the  western  sky,  and  will  not  make  goods, 
nor  will  merchants  buy  them,  when  the  financial  prospect  is  un- 
settled. Against  fire  and  flood,  and  the  perils  to  health,  life  and 
limb  he  can  insure;  but  the  risks  from  a devious,  faithless  cur- 
rency he  must  bear  himself.  Even  in  this  adventurous  age, 
when  the  insurance-man  surprises  us  by  his  ingenious  and  multi- 
tudinous plans  for  our  security,  no  one  has  yet  had  the  courage 
to  set  up  a “ guaranty  and  indemnity  company  ” for  the  protec- 
tion of  those  exposed  to  the  explosive  action  of  depreciated  pa- 
per-money. Under  any  system  into  which  credit  enters,  all  but 
adventurers  and  gamblers  must  have  a trusty  measure  of  value, 
and  a future  of  reasonable  certainty.  Having  these,  they  can 


61 


adapt  themselves  and  their  business,  with  some  success,  to  almost 
any  conditions,  and  the  changes  which  time  may  introduce. 

To  diminish  the  volume  and  increase  the  value  of  greenbacks, 
and  thus  prepare  the  way  for  resumption,  Congress,  without  long- 
er delay,  should  restore  to  the  bill-holder  the  only  privilege 
vouchsafed  him  in  the  original  tender  law,  and  which  was  wrong- 
fully taken  from  him  so  soon  as  it  became  worth  anything — the 
privilege,  I mean,  of  conversion  into  a gold-bearing  bond.  One 
paying  interest  at  the  rate  of  four  and  a-quarter  per  cent,  and  run- 
running  twenty-five  years,  with  gold  as  now  at  one  hundred  and 
seven,  would  do  excellent  service.  It  would  appreciate  the  cur- 
rency slightly,  acting  most  efficiently  when  money  was  abundant 
and  cheap,  and  stopping  work  when  money  became  scarce  and 
dear.  Moderately  and  safely,  it  would  absorb  the  surplus  notes 
for  which  there  is  now  no  legitimate  use,  preventing  perhaps  an 
inflation  when  trade  revives,  and  the  demand  becomes  more  ac- 
tive. In  this  manner  would  be  made  the  necessary  preparation 
for  resumption  at  the  appointed  time,  January  first,  1879. 


VI. 

The  Interconvertible  Bond  as  a Regulator  of 
Volume  and  Measure  of  Value. 

There  are  many  schemes  for  resuming  specie  payment,  most 
of  them  advocated  by  persons  in  quest  of  easy,  frequently  impos- 
sible, methods — methods  which  will  cause  no  reduction  in  the 
volume  of  circulating  notes.  To  some  extent  these  originate  in 
selfish  motives  or  class  prejudices,  but  in  many  instances  men 
think  the  objects  not  inconsistent.  No  doubt  there  are  honest 
persons  who  regard  the  differing  values  of  specie  and  paper  as 
owing  to  faulty  or  wayward  movements  of  the  former,  and  that 
the  disparity  may  be  corrected  by  some  legislative  device  which, 
without  disturbing  any  important  existing  interest,  will  drag 
down  gold  to  the  greenback  level.  They  forget  that  this  metal 
has  for  the  time  a natural  and  fixed  relation  to  other  products, 
and  even  to  paper  money,  which  cannot  be  changed  by  schemes 
or  devices  of  any  kind. 


62 


A plan  proposed  several  years  ago,  and  now  urged  pertina- 
ciously by  Congressman  Kelley,  supported  by  B.  F.  Butler,  Peter 
Cooper,  J.  Watson  Webb,  Senator  Booth,  the  venerable  and  dis- 
tinguished Henry  C.  Carey,  and  others,  has  some  new  features, 
and  deserves  respectful  consideration.  Mr.  Kelley  is  its  best 
known  and  most  earnest  advocate.  Its  professed  aim  is,  not  so 
much  to  secure  resumption,  as  to  give  flexibility  and  stability  to 
legal  tenders,  and  eu  hance  their  value.  The  inflationists  gener- 
ally throughout  the  country  seem  to  have  embraced  the  plan, 
perhaps  because  of  a belief  that,  in  some  unknown  way,  it  would 
make  money  plentiful  and  cheap.  To  speak  briefly,  it  proposes 
that  the  government,  having  everywhere  substituted  greenbacks 
for  national  bank  notes,  should  issue  inter-convertible  bonds,  so 
called,  bearing  3.65  per  cent  per  annum  interest  (equal  to  one 
cent  a day  on  one  hundred  dollars),  “ payable  on  demand  [with 
accrued  interest]  in  greenbacks.”  These  are  to  be  issued  for 
sums  of  not  less  than  fifty  dollars  each,  and  offered,  to  the  ex- 
tent of  the  demand,  in  exchange  for  legal  tenders.  That  is,  both 
bonds  and  treasury  notes  may  be  issued  without  limit,  each  in 
exchange  only  for  the  other.  The  former,  Mr.  Kelley  thinks, 
would  be  largely  sought  as  a safe  temporary  investment  by  banks, 
banking  companies,  savings  institutions,  and  the  people  generally. 
This  part  of  the  scheme  would  act  most  efficiently  when  money 
was  abundant  and  cheap.  In  times  like  the  present,  when  busi- 
ness is  sluggish  and  the  demands  for  loans  slack,  the  bonds 
would,  to  a limited  extent,  find  a ready  market.  Those  having 
idle  funds  on  deposit  or  in  hand,  waiting  the  maturity  of  contracts, 
or  a better  opportunity  to  make  purchases,  would  take  them  for 
the  interest  to  be  gained,  incurring  no  risk.  Executors,  admin- 
istrators, trustees  and  guardians  would  be  similarly  inclined. 
The  banks,  having  the  proposed  authority  to  do  so,  would  gladly 
exchange  for  them  a large  proportion  of  the  greenbacks,  amount- 
ing to  tens  of  millions,  which  they  are  now  required  to  hold  as 
reserves.  More  or  less,  they  would  do  the  same  with  the  surplus 
funds  they  are  accustomed  to  loan  on  call.  Other  institutions 
having  large  immediate  liabilities,  like  savings  banks  and  insu- 
rance and  trust  companies,  would  find  them  an  eligible  security, 
far  more  trusty  in  squally  times  than  ordinary  loans,  and  suffi- 
ciently profitable  to  attract  this  class  of  lenders.  Had  the  sys- 
tem been  in  operation  during  the  last  year,  when  money  has  aver- 
aged, say,  three  per  cent  “ on  call,”  it  is  probable  that  as  much 


as  one  hundred  million  legal  tenders  would  have  gone  into  con- 
vertibles, depleting  the  currency  to  a notable  extent,  and  costing 
the  treasury,  in  interest,  $3,650,000,  a sum  many  think  it  could 
well  afford  to  pay  to  somebody  in  consideration  of  its  having  had 
the  use  of,  say,  $400,000,000  thirteen  years  for  nothing.  Un- 
doubtedly, the  scheme  would,  for  the  moment,  be  a great  boon 
to  our  banking  and  other  moneyed  institutions,  enabling  them  to 
dispense  with  an  important  part  of  their  unproductive  funds,  and 
thus  relieved,  to  make  better  exhibits  at  the  end  of  the  year  than 
they  otherwise  could.  In  very  dull  seasons,  a “paternal  gov- 
ernment ” would  take  the  surplus  funds  of  the  people,  pay  for  the 
keeping,  and  return  them  promptly  whenever  the  money  could 
be  more  profitably  used.  Thus  the  current  rate  of  interest,  on  a 
certain  class  of  loans,  would  be  buoyed  up  in  periods  of  depres- 
sion so  that  lenders,  at  least,  would  be  able  to  eke  out  a living; 
for  it  is  evident  that  the  rate  could  never  fall  below  3.65  p.  c. 
“on  call”  when  the  government  stood  ready  to  pay  that. 

It  is  not  probable  that  Mr.  Kelley’s  bond  would  prove  satisfac- 
tory to  the  multitude  of  small  investors  who  are  accustomed  to 
place  their  earnings  in  the  savings  banks,  though  that  gentleman 
thinks  otherwise.  In  this  part  of  the  country,  these  banks,  with 
some  exceptions,  are  managed  with  prudence,  paying  with  rea- 
sonable certainty  five  or  six  per  cent,  per  annum,  which  rate  de- 
positors would  not  willingly  exchange  for  a much  lower  one. 
But  there  is  a serious  objection  of  another  kind  to  the  bond  in 
question.  To  answer  its  purpose,  it  must  have  every  facility  for 
instant  conversion,  and  would  doubtless  be  made  payable  to 
bearer.  With  this  provision,  it  would  be  almost  as  dangerous 
to  hold  as  money,  particularly  when  in  the  hands  of  the  working 
people  who  have  few  conveniences  for  safe-keeping,  and  to  whose 
special  wants  it  is  expected  to  minister.  Since  the  phrensy  for 
money  and  money’s  worth  has  become  epidemic,  made  so  largely 
by  a depreciating  currency,  a race  of  burglars,  robbers,  thieves 
and  pick-pockets,  unsurpassed  in  boldness  and  skill,  has  grown 
up,  making  securities  of  this  kind  a precarious  kind  of  property, 
to  be  avoided  most  of  all  by  those  who  now  use  the  savings 
banks. 

Undoubtedly,  convertible  bonds  would  absorb  legal  tenders 
when  the  latter  were  in  excess,  and  worth  no  more  to  loan  than 
3.65  per  annum.  But  this  absorption  would  be  checked  or  sus- 
pended when  business  revived,  and  the  calls  for  money  were 


64 


more  urgent.  If  trade  became  active,  the  rate  of  interest  would 
advance,  more  currency  would  be  needed,  and  bonds  for  conver- 
sion be  taken  to  the  treasury.  At  this  stage,  should  stringency 
occur,  indicating  a short  supply  of  circulating  notes,  the  move- 
ment would  be  accelerated  till  a large  proportion  of  those  temp- 
orarily in  retirement  were  restored  to  circulation.  The  greater 
volume  of  greenbacks,  called  forth  at  a critical  moment,  would 
tend  to  relieve  the  pressure,  sustain  prices,  gladden  the  hearts  of 
debtors  and  business  men,  and  might  under  favorable  circum- 
stances, like  the  flexible,  specie-paying  notes,  prevent  serious  re- 
verses. 

In  the  way  indicated,  the  interconvertible  bond  system,  worked 
by  self-interest,  would,  it  is  claimed,  favor  expansion  when  trade 
and  the  public  good  required  it.  Within  a limited  range,  it 
would  have  the  kind  of  elasticity  for  which  coin  is  distinguished. 
Bank  managers  and  others  would,  to  a certain  extent,  convert 
their  3.65’s  whenever  they  could  use  the  money  more  profitably; 
but  it  is  obvious  that  the  severest  pressure  could  not  call  forth 
all  the  notes  which  had  previously  been  retired.  Any  reserves 
laid  by  in  compliance  with  the  statute  would  be  kept  (if  kept  at 
all)  in  interest-earning  bonds.  Administrators,  trustees,  savings 
institutions,  etc.,  expecting  soon  to  want  legal  tenders,  would 
hold  on  to  them  tenaciously,  especially  when  their  supply  was 
getting  short,  and  the  times  were  suspicious.  Like  a sponge,  the 
friendly  bonds,  having  power  to  absorb  and  capacity  of  storage, 
would  yield  up  on  pressure  a definite  amount  of  watered  curren- 
cy, but  could  not  be  squeezed  quite  dry.  So  far  as  anything  re- 
mained, so  far  as  conversion  was  prevented  or  delayed  by  con- 
siderations of  any  sort,  the  circulation  would,  as  a net  result,  be 
contracted — contracted  as  compared  with  its  volume  before  the 
system  was  introduced.  Without  reference  to  the  result  in  this 
particular,  when  the  compressed  sponge  had  done  its  utmost,  and 
no  more  legal  tenders  could  be  had,  the  scheme  would  break 
down  hopelessly.  Any  further  expansion  to  meet  the  wants  of 
a more  active  industry,  or  a new  emergency  of  any  kind,  would 
be  impossible.  Of  a sudden,  perhaps,  however  urgent  the  occa- 
sion, the  currency  would  become  unyielding,  inflexible,  iron- 
bound,  as  it  were,  having  in  the  highest  degree  all  the  defects 
it  pretends  to  cure,  and  differing  wholly,  in  this  regard,  from 
metallic  money  the  supply  of  which  is  not  cut  off*  by  the  inade- 
quate provision  of  any  local  system,  but,  coming  as  it  does  from 


65 


all  the  world,  is  practically  inexhaustible.  But  it  may  be  said 
that  the  supposed  result  would  be  prevented  by  the  relief  afford- 
ed in  the  early  and  middle  stages  of  the  pressure,  before  the 
barrier  to  expansion  (immobility)  had  been  reached.  The  claim 
might  be  a plausible  one  were  business  always  done  on  a healthy 
basis,  and  were  the  last  notes  from  the  treasury — the  last  squeeze 
of  the  sponge — sufficient  to  satisfy  the  existing  and  every  possi- 
ble demand.  But,  memorably,  the  fact  is  otherwise.  Uniform 
health  in  the  financial  world  cannot  be  presumed.  There  are 
frequent  periods  of  wild  speculation  when  goods  anduestate  are 
bought  and  sold  many  times  on  their  way  from  producers  to 
consumers,  attended  by  rising  prices,  enhanced  profits,  a greatly 
enlarged  volume  of  business,  and  a correspondingly  more  active 
demand  for  circulating  notes.  When  the  excitement  is  highest 
and  values  most  inflated;  when  trade  is  morbidly  and  dangerous- 
ly active  though  in  appearance  largely  remunerative,  and  every 
available  dollar  has  been  brought  into  service;  then  it  is  that 
the  crisis  is  at  hand.  While  business  is  still  moving  on  at  a 
break-neck  pace,  the  fixed  obstacle  of  an  inflexible  currency  is 
encountered,  and  something  or  somebody  breaks. 

We  want  a currency  which  will,  as  far  as  possible,  repress 
these  speculative  and  dangerous  movements  in  the  beginning — 
one  which,  yielding  freely  to  the  legitimate  wants  of  business, 
will  apply  the  brake,  steadily  but  firmly,  when  speed  is  becoming 
too  great  for  safety.  The  object  is  not  to  stop  movement  ab- 
ruptly, and  thus  precipitate  a crisis,  but  to  check  it,  to  crush  out 
speculation,  and  restore  trade  to  its  normal  state.  The  convert- 
ible bond,  while  bearing  so  low  an  interest  as  3.65,  would  give 
up  the  coveted  legal  tenders  in  the  early  stages  of  the  excite- 
ment, kindling  the  fire,  and  then  of  a sudden  refusing  relief, 
possibly  at  a time  when  a further  temporary  supply  might  miti- 
gate the  pressure,  break  the  fall  from  higher  to  lower  prices, 
and  perhaps  save  from  shipwreck.  Banks  and  bankers  it  is  true 
might,  at  the  last  moment,  convert  the  bonds  they  had  held  back 
as  a reserve,  but  in  doing  so  they  would  exhaust  their  resources 
wholly,  without  giving  more  succor  than  could  have  been  afford- 
ed under  the  old  system  when  they  chose  to  release  their  coin 
reserves.  Like  the  convertible  bank  note,  and  the  other  credit 
intruments  used  to  facilitate  exchange  and  disturb  values,  the 
Kelley  bond,  if  I mistake  not,  would  prove  injuriously  flexible 
in  the  early  period  of  a financial  fever,  and  destructively  rigid  at 

9 


66 


a later  date;  supplying  fuel  liberally  when  the  supply  should  be 
restricted,  and  denying  aid  when  denial  might  be  fatal.  As  a 
regulator  and  remedial  agent  or  agency  when  business  and  trade 
are  distempered,  it  must  prove  a poor  substitute  for  a specie  cur- 
rency. 

No  doubt  the  interconvertible  bond,  considered  as  an  order  on 
the  treasury  for  greenbacks  held  as  a special  deposit  for  their 
redemption,  would,  in  ordinary  times,  control  or  hinder  the 
slighter  and  not  very  important  fluctuations  in  the  currency, 
promoting  healthful  contractions  and  expansions  in  answer  to  the 
calls  of  legitimate  business;  but  at  such  times  the  old  fashioned 
bank  note  payable  in  coin  always  proved  sufficient.  Nor  is 
the  fact  that  it  must  be  powerless  to  prevent  or  curb  the  great 
financial  phrensies  which  periodically  sweep  every  highly  civil- 
ized country,  or  to  turn  aside  the  final  catastrophe  and  prolong- 
ed collapse  which  are  but  effects  of  the  previous  madness,  a suffi- 
cient objection  to  its  use.  But  to  proclaim  it  a panacea,  a 
sovereign  remedy  for  every  currency  evil,  is  preposterous. 

The  truth  is  a public  “ craze  ” of  the  kind  referred  to,  may  ori- 
ginate and  get  under  dangerous  headway  with  only  a limited 
dependence  on  the  money  market,  as  before  intimated.  All  the 
paper  remedies  yet  devised  have  fed  the  fire,  intensified  the  ex- 
citement, refused  “ aid  and  comfort  ” at  the  critical  period,  and 
made  more  calamitous  the  downfall;  and  it  is  not  reasonable  to 
suppose  that  the  convertible  bond  will  set  aside  all  that  history 
has  taught  at  so  much  cost.  Not  improperly,  the  claim  may  be 
made  that,  as  a preventive  of  panics,  it  has  no  important  advan- 
tage over  the  old  time  convertible  bank  note,  confessedly  imper- 
fect as  it  is,  and  that  it  has  some  defects  peculiar  to  itself  as  will 
appear  in  the  sequel.  As  a regulator  and  standard  of  value  for 
considerable  periods  and  in  tempestuous  times,  it  will  be  shown 
to  deserve  no  confidence. 

In  the  preceding  remarks,  I have  assumed  that  the  legal  ten- 
ders received  in  exchange  for  bonds  would  be  kept  in  the  treas- 
ury till  called  for  by  the  holders  of  the  latter,  as  they  clearly 
should  be.  Were  they  thus  retained,  the  bonds  would  not  differ 
in  their  uses  from  the  certificates  of  deposit  which  the  govern- 
ment now  issues  to  the  banks  for  clearing  house  purposes,  though 
more  desirable  to  hold  because  of  the  interest  they  would  bear. 
But  Mr.  Kelley’s  plan,  as  I understand  it,  does  not  permit  this 
“ locking  up  of  greenbacks.”  “The  whole  amount  received,” 


67 


he  contends,  should  be  employed  to  redeem  at  par  six  and  five 
per  cent  bonds,  the  treasury  thereby  saving  a large  amount  of 
interest,  or  the  difference  between  the  rates  named  and  3.65  p.  c. 
per  annum.  Were  this  course  taken,  and  the  notes  again  put  in 
circulation,  there  would  be  none  of  the  proposed  contraction  at 
the  outset;  the  assumed  redundancy  of  the  currency  would  not 
be  diminished,  nor  its  uniformity  in  purchasing  power  in  any 
way  promoted.  Thus  the  scheme  would  be  divested  of  one  of 
its  most  important  features — one  essential  to  its  subsequent  suc- 
cessful working.  Another  result  pregnant  with  disaster  might 
be  expected.  Were  the  bond-holders’  money  expended  in  the 
way  prescribed,  there  would  of  course  be  no  redemption-fund 
left,  and  the  government,  when  called  on  for  payment,  be  com- 
pelled to  issue  more  greenbacks,  or  confess  bankruptcy.  The 
former  alternative  would  be  taken,  and  the  way  opened  to  inde- 
finite expansion.  Nor  would  the  proposed  amendment  of  the 
original  bill  requiring  twenty-five  per  cent  of  the  notes  received 
to  be  retained  in  the  treasury  (out  of  which  the  bonds  presented 
might  be  paid)  afford  sufficient  protection  against  the  evil.  A 
speculative,  or  even  an  active  legitimate  demand  might  soon  ex- 
haust this  scanty  reserve,  driving  the  government  to  the  printing 
press  for  supplies.  On  every  recurrence  of  stringency,  prompt- 
ing to  persistent  conversion,  new  emissions  would  be  necessary, 
never  to  be  called  in  and  cancelled.  When  a season  of  sharp 
pressure  was  over,  the  currency  would  be  found  more  redundant 
than  at  the  beginning,  with  no  additional  provision  for  reducing 
the  volume.  The  bonds  with  the  accrued  interest  would,  as  com- 
pared with  any  fixed  standard,  have  less  and  less  value  in  pro- 
portion as  the  medium  in  which  they  were  payable  was  depreci- 
ated. Instead  of  buoying  up  a sinking  currency,  they  would  be 
the  means  of  dragging  it  down  to  a lower  level.  While  this 
was  going  on,  the  gold  bonds  to  be  bought  with  diluted  paper 
would  rise  in  the  ratio  of  its  dilution,  making  necessary  a greater 
nominal  outlay  in  each  successive  purchase. 

There  can  be  no  doubt  that  the  interconvertible  bonds  would 
produce  expansion  in  another  way.  Were  they  issued  of  as  low 
a denomination  as  fifty  dollars,  in  accordance  with  the  plan,  they 
would — certainly  to  a notable  extent — circulate  as  money  like 
the  present  and  former  convertible  bank-notes,  passing,  when 
much  interest  had  accrued,  at  their  face  plus  the  earnings,  and 
thus  adding  to  the  currency.  The  interest  could  be  so  easily 


68 


computed  on  a 3.65  bond  that  little  embarrassment  would  come 
from  that.  The  banks,  regarding  them  as  equal  to  accepted 
sight  drafts  on  the  U.  S.  treasury,  would  willingly  take  them, 
and  whatever  they  received  their  customers  would  not  refuse. 
But  if  no  bonds  were  allowed  of  a lower  denomination  than  one 
thousand  dollars,  this  objection  would  be  partially  obviated. 
They  would  then  be  used  only  in  the  larger  transactions,  for  the 
same  purposes  say  as  the  one  thousand  dollar  notes  now  in  cir- 
culation. The  restriction,  however,  would  place  them  quite  be- 
yond the  reach  of  the  “ working  people  ” and  small  investors  who, 
it  is  claimed,  would  seek  them  largely.  Only  those  obliged  to 
keep  on  hand  considerable  amounts  in  cash  funds  would  have 
use  for  them.  To  this  class,  undoubtedly,  they  would  be  con- 
venient and  profitable,  as  already  suggested.  Considered  as 
orders  on  the  treasury  for  greenbacks,  no  creditor  would  decline 
to  take  them.  Nor  could  holders  have  any  motive,  till  notes 
were  wanted  for  smaller  payments,  to  forego  the  interest,  and 
present  them  for  redemption. 

In  the  above  remarks,  I have  supposed  Mr.  Kelley’s  peculiar 
scheme  in  operation.  But  if  the  notes  received  into  the  treasury 
were  not  paid  out  till  convertible  bonds  were  presented  for  re- 
demption, there  could  be  no  expansion,  however  small  the  bonds. 
On  the  contrary,  the  contraction  would  be  considerable,  as  already 
explained. 

Provided  the  volume  of  the  currency  were  not  increased,  I 
agree  with  those  who  claim  that  the  3.65  bond,  as  to  any  effect 
it  might  have  on  the  value  of  the  greenback,  would  not  be  great- 
ly improved  by  making  the  interest  payable  in  gold.  Whether 
so  payable  or  not,  the  bond  itself  would  not  be  worth  par  in 
currency  to  ordina^  investors — those  having  no  immediate  lia- 
bilities, and  caring  little  for  the  convertible  privilege.  Persons 
wishing  a permanent,  equally  safe  investment  would  prefer  the 
plain  government  bond,  or  a good  mortgage  note,  because  of  its 
yielding  larger  interest.  Of  two  convertible  bonds,  one  paying 
interest  in  gold  the  other  in  paper,  the  first  would  be  most  attrac- 
tive to  the  class  having  use  for  it  on  account  of  its  earning  most. 
It  would  be  a better  “ absorbent  ” than  the  other  of  circulating 
notes,  and  hold  on  to  them  more  tenaciously  when  the  demand 
for  money  increased;  but  neither  would  be  sufficiently  profitable 
to  tempt  the  people  generally.  As  the  government  credit  now 
stands,  a very  long  3.65  currency  bond  would  be  worth,  in  gold, 


69 


about  seventy-six  per  cent.,  a gold  paying  bond  about  eighty- 
two.  At  these  prices,  no  one  would  exchange  notes  equal  now 
to  ninety-three  per  cent.,  in  gold,  for  either  description  of  bond, 
losing  in  the  transaction  seventeen  per  cent,  in  one  case,  and 
eleven  in  the  other.  Of  course  a security  of  the  kind  named 
would  have  no  tendency  to  appreciate  legal  tenders.  The  value 
of  the  latter  would,  as  now,  be  governed  exclusively  by  limitation 
or  volume.  Instead  of  being  lifted,  as  claimed,  they  would  lift 
to  their  own  level  so  many  of  the  bonds  as  were  wanted  by  banks, 
bankers,  etc.,  for  special  purposes.  In  order  to  shift  the  control- 
ling power  to  the  other  side,  and  make  a passive  thing  an  active 
influence  and  agency,  it  would  be  necessary  to  strengthen  the 
3.65s  by  adding  to  the  interest  rate.  A four  and  a quarter  per 
cent,  interconvertible  gold  paying  bond,  worth  for  investment 
say  ninety-six  per  cent,  in  specie  would  have  the  requisite  qual- 
ities, and  at  once  take  a commanding  position.  By  reason  of  its 
greater  buoyancy  it  would  regulate  and  rule  legal  tenders,  carry- 
ing them  up  from  ninety-three  to  ninety-six.  Freely  and  largely, 
in  the  present  condition  of  the  money  market,  they  would  imbibe 
circulating  notes,  and  afterward  when  the  times  changed,  yield 
them  up  reluctantly  and  sparingly,  the  contraction  in  the  begin- 
ning exceeding  the  expansion  at  the  close,  so  that,  when  the 
movement  had  ended,  the  volume  would  be  diminished,  and  the 
value  proportionally  increased.  The  average  amount  of  notes 
lying  in  the  treasury  and  withdrawn  from  circulation  would  be 
considerably  greater  than  it  could  be  under  the  influence  of  the 
cheaper  bond.  The  two  classes  of  convertibles  would  give  equal 
elasticity,  but  the  high  priced  security  would,  as  the  final  or  net 
result,  favor  contraction  to  the  extent  say  of  three  per  cent.,  while 
the  other,  in  a propable  contingency  (already  referred  to),  would 
lead  to  expansion. 

Should  Mr.  Kelley’s  scheme  in  any  way  permit  the  increase  of 
circulating  notes,  it  would  be  of  prime  importance  that  his  3.65 
convertibles  should  be  gold-paying  bonds.  Thus  fortified,  they 
would  be  worth,  for  ordinary  uses,  eighty-two  per  cent;  and 
however  recklessly  legal  tenders  were  issued,  they  could  not  fall 
below  those  figures — below  the  market  value  of  the  security  for 
which  they  might  at  will  be  exchanged.  Any  additional  issues 
would  promptly  go  into  bonds,  the  movement  defeating  every 
attempt  at  further  inflation. 

The  claim  that  the  3.65  bond  would  lower  the  common  rate  of 


'TO 


interest,  and  furnish  the  government  with  funds  with  which  to 
pay  off,  (“  five  hundred  million  in  six  months,”  says  Mr  Kelley,) 
in  a few  years,  the  six  and  five  p.  c.  gold  bonds,  leaving  in  their 
stead  an  equal  amount  of  convertibles,  and  saving  fabulous  sums 
of  interest,  is  of  course  extravagant,  and  based  on  a misunder- 
standing of  the  laws  which  govern  interest.  What  is  called  in- 
terest grows  out  of  the  fact  that  certain  persons  have  more  and 
others  less  capital  than  they  wish  to  employ  in  production  in 
their  own  business.  The  lenders  furnish  the  supply,  the  borrow- 
ers the  demand,  and  the  relation  of  one  to  the  other,  made  known 
by  competition,  determines  the  rate.  The  latter  is  not  lowered 
generally  because  a few,  on  certain  conditions,  or  for  an  equiva- 
lent other  than  money,  choose  to  make  loans  at  3.65  p.  c.,  or  be- 
low the  general  market  rate.  Such  loans,  prompted  by  the 
peculiar  liabilities  and  circumstances  of  the  lender,  could  exert 
no  wider  influence  than  they  do  now  when  made  in  large  amounts 
at  three  per  cent,  on  call,  in  Wall  street.  Profit,  often  confound- 
ed with  interest,  provides  the  fund  out  of  which  the  latter  is  paid, 
but  is  not  otherwise  directly  connected  with  it.  Of  necessity,  it 
must  be  more  than  sufficient  to  pay  for  the  use  of  capital  bor- 
rowed, but  with  this  limitation  in  one  direction,  it  may  be  higher 
or  lower,  from  time  to  time,  without  immediately  disturbing 
the  relation  of  lender  to  borrower.  High  profits,  however,  by 
offering  new  inducements  to  one  class  to  employ  in  their  own 
business  their  surplus  capital,  and  to  the  other  to  enlarge  their 
capital  by  loans,  both  seeking  to  share  the  enhanced  gains,  would 
erelong  augment  the  rate  of  interest  by  diminishing  the  supply 
of  loanable  capital.  This  loanable  capital,  varying  from  year  to 
year,  commanding  high  rates  in  times  of  speculative  activity, 
and  low  rates  in  periods  of  depression  and  discouragement,  can- 
not be  evoked  by  new  bonds  bearing  a low  and  insufficient  inter- 
est, nor  by  juggling  legislation  of  any  kind;  but  Congress  can, 
by  enacting  wise  laws,  repealing  foolish  and  wicked  ones,  and 
abandoning  the  “ paternal  system  ” of  government,  do  much  to 
give  stability  to  business,  uniformity  to  the  loan  market,  and 
perennial  prosperity  to  the  people. 

There  is  a very  serious  objection  to  the  convertible  bond,  as 
the  regulator  of  the  currency,  growing  out  of  the  instability  of 
the  public  credit.  Suppose  Congress  should  authorize  a four  and 
a quarter  per  cent  gold  bond  of  the  kind  suggested.  In  process 
of  time,  it  might  become  worth,  in  the  general  market,  par  in 


n 


coin.  Greenbacks,  through  conversion,  would  be  carried  4up  to 
the  same  level.  While  appreciation  was  going  on,  there  would 
be  contraction,  a fall  of  prices  and  a money  pressure,  relieved  at 
intervals,  but  not  cured  by  reconversion — a contraction  of  the 
same  kind  and  degree  as  that  caused  by  cancellation,  or  by  any 
movement  toward  resumption.  The  volume  of  the  currency 
would  adjust  itself  to  its  newly  acquired  value  (value  of  its  units). 
The  bond,  by  its  coercive  power,  would  regulate  and  govern  both. 
When  paper  had  become  equal  to  specie,  the  two  would  circulate 
side  by  side  neither  having  a preference  except  in  the  way  of 
convenience.  Could  the  bond  be  persuaded  to  remain  at  par, 
the  system  would  work  well  undoubtedly,  but  suasion  could  not 
secure  that  result.  A day  or  a week  might  bring  a change,  and 
the  equality  spoken  of  be  destroyed.  Should  the  bond  rise  say  to 
one  hundred  and  two,  greenbacks  would  be  worth  more  for  con- 
version than  circulation.  Consequently  they  should  disappear, 
leaving  the  void  to  be  supplied  by  the  cheaper  medium,  specie. 
While  the  change  was  in  progress  and  not  completed,  there  would 
be  a short  supply  of  money,  and  a tendency  to  lower  prices.  If 
then,  owing  to  a change  in  the  financial  out  look,  the  bond  should 
fall  below  par,  say  to  ninety-eight,  coin  would  be  withdrawn  as 
too  valuable  for  money,  and  paper  alone  constitute  the  circulating 
medium.  Temporary  confusion  in  the  money  market,  the  re-ap- 
pearance of  retired  greenbacks,  and  the  milder  symptoms  of  in- 
flation would  ensue.  These  fluctuations  or  pendulum-like  move- 
ments of  the  convertible  bond,  the  proposed  measure  of  value, 
passing  from  one  side  to  the  other  of  the  world’s  standard,  obe- 
dient to  a hundred  unforseeen  influences,  and  compelling  frequent 
changes  in  the  medium  with  which  payments  are  made,  would 
be  an  intolerable  evil — an  evil  not  to  be  avoided,  even  partially, 
except  by  the  use  of  a bond  at  a lower  rate  of  interest — a bond 
which,  consigning  the  greenback  to  perpetual  degradation,  would 
never  rise  to  par.  The  3.65s  would,  I think,  have  the  requisite 
poorness.  In  value  for  investment  purposes,  they  would  not 
soon  work  up  to  a point  in  dangerous  proximity  to  the  gold  level. 
Inside  their  natural  limits,  like  the  four  and  a quarter  per  cents, 
they  would  move  up  and  down,  having  a range,  not  of  four  per 
cent  merely,  but,  it  may  be,  of  twenty  or  thirty  according  to  the 
times. 

The  public  credit  is,  in  truth,  too  precarious  and  indefinite  for 
adoption  as  a measure  of  value,  even  for  short  periods.  It  is  and 


72. 


must  be  of  slow  growth;  is  exposed  to  a hundred  disturbing  in- 
fluences, and  has  not  half  the  stability  of  the  best  private  credit. 
Fair  and  full  of  promise  to-day,  cloud  and  storm  may  envelop 
it  to-morrow.  A great  foreign  war  would  knock  it  down  ten  or 
fifteen  per  cent,  and  the  loss  of  an  important  battle  half  as  much 
more.  Aggressive  movements  on  our  part  or  the  part  of  other 
nations,  domestic  strife,  threatened  repudiation,  a large  radical 
element  in  Congress  or  among  the  people,  as  well  as  financial 
embarrassment  and  a restricted  money  market,  would  similarly 
affect  it.  At  an  early  period  during  the  late  “ Rebellion,”  Unit- 
ed States  six  per  cent  ten  years  gold  bonds  were  sold  at  eighty- 
three  in  coin.  Soon  after  the  upheaval  of  1837  and  1839,  when 
the  national  debt  had  been  paid,  the  government  tried  in  vain  to 
borrow  money  in  the  markets  of  Europe  on  a six  per  cent  bond. 
In  the  comparatively  insignificant  war  of  1812,  the  treasurer,  at 
one  time,  was  obliged  “to  issue  in  stocks  $4,266,000  to  obtain 
$2,500,000”  (Hildreth),  and  the  contest  was  brought  to  a close 
partly  on  account  of  the  seeming  impossibility  of  raising  funds 
to  carry  it  on.  Only  a few  months  ago,  when  immediate  war 
was  threatened  between  Russia  and  Turkey,  the  securities  of  the 
former,  which  had  previously  stood  well  in  the  London  market, 
fell  in  one  day  seven  per  cent,  in  two  days  twelve  per  cent,  and 
in  a week  nearly  twenty  per  cent. 

A currency  whose  value  depends  on  any  bond  liable  to  these 
wide  and  perhaps  sudden  fluctuations,  needing  at  frequent  inter- 
vals the  interference  of  Congress  to  adjust  the  supply  to  the  de- 
mand, and  the  standard  of  value  to  changing  circumstances  and 
conditions,  would  not  promote  justice,  or  in  any  way  be  an  im- 
provement on  that  which  has  so  long  afflicted  us. 

In  one  thing  I agree  with  the  school  of  Mr.  Kelley.  No  doubt 
greenbacks  ought  (if  anywhere)  to  be  legal  tender  at  the  custom 
houses.  Had  they  been  so  from  the  first,  over-issue  and  depre- 
ciation to  the  extent  at  one  time  of  sixty-five  per  cent,  would  not 
have  been  permitted.  The  protectionists  in  Congress,  rejoicing 
in  undisputed  power  and  the  new  tariff,  must  have  interfered  to 
prevent  it.  Nor  would  they  have  allowed  that  eminently  wise 
provision  making  greenbacks  convertible  into  twenty  year  six 
per  cent,  gold  bonds  to  be  repealed.  Had  they  felt  that  every 
new  emission  in  effect  diminished  the  duty  on  imported  goods, 
and  made  themselves  and  their  friends  at  home  equal  sufferers 
with  others  from  the  evils  of  depreciation,  the  mischief  to  be 


73 


wrought  by  inflation  could  not  have  been  ignored.  Nothing 
more  surely  leads  men  to  think  of  consequences,  and  to  help  others 
when  helping  themselves,  than  self-interest.  It  is  true,  the  effects 
of  more  currency  might  have  been  counteracted  by  successive 
additions  to  the  tariff;  but  such  additions  must  have  been  too 
obviously  for  the  benefit  of  a single  much  favored  class — a class 
never  better  able  to  make  sacrifices — to  be  popular.  Besides, 
the  downward  course  of  paper  was  so  rapid  that  legislation,  how- 
ever agile,  could  scarcely  have  kept  up  with  it.  When  protec- 
tionists saw  that  their  new  advantages  and  present  opportunity 
were  slipping  away  with  fearful  haste,  and  that  repressive  meas- 
ures of  a decisive  kind  must  be  taken,  they  would  have  stood  up, 
an  invincible  band,  against  greenback  degradation,  and  the  causes 
leading  to  it  and  perpetuating  it. 

Should  treasury  notes  now  be  made  receiveable  for  customs, 
home  producers  of  a certain  class  would  seem  to  lose  in  protec- 
tion the  difference  between  notes  and  coin,  but  the  compensations 
should  not  be  overlooked.  The  opening  of  a new  field  for  their 
employment — the  additional  work  required  of  them — could  not 
but  enhance  their  value.  How  much  the  advance  would  be  no 
one  can  safely  predict,  though  it  ought  to  be  at  least  appreciable, 
and  sufficient  to  cheer  the  friends  of  a better  currency.  As  a 
consequence  of  the  movement,  some  millions  of  notes  having 
been  diverted  into  new  channels,  there  would  be  in  ordinary 
times,  but  not  now,  a degree  of  stringency,  the  symptoms  having 
the  same  characters  as  those  produced  by  the  general  locking  up 
or  cancellation  of  greenbacks.  Resumption,  approached  in  this 
way,  would  be  no  easier  or  more  attractive  than  if  begun  by  call- 
ing in  and  blotting  out  superfluous  paper.  In  whatever  way  the 
end  be  sought,  the  same  obstacles,  greatly  magnified  by  the  timid 
and  the  knavish,  must  be  surmounted. 


VII. 

Some  Commercial  Reasons  assigned  for  delay- 
ing Resumption. 

Many  are  the  reasons  assigned  for  delaying  resumption.  One 
of  these,  our  foreign  indebtedness,  is  often  repeated  by  busi- 

10 


74 


ness-men,  and  is  very  generally  thought  to  be  formidable.  To 
the  people  of  Europe  we  owe  a very  large  sum.  For  the  last 
few  years,  and  particularly  since  irredeemable  paper  began  its 
reign,  the  amount  has  been  increasing  at  a fearful  rate.  Our 
bonds  and  obligations,  national,  state,  municipal  and  corporate, 
must  now  be  equal  to  more  than  two  thousand  million,  in  many 
cases  bearing  a high  rate  of  interest.  This  immense  amount  has 
been  received  in  iron,  woolens,  cottons,  silks,  teas,  coffees,  etc. 
A large  proportion  of  the  whole  represents  the  losses  by  war, 
speculation  and  unremunerative  investments.  So  much  of  the 
debt  as  shall  not  be  wiped  out  by  repudiation  or  bankruptcy, 
must  be  paid,  interest  and  principle,  by  the  shipment  of  cotton, 
tobacco,  flour,  petroleum,  pork,  cheese,  gold,  silver,  etc.,  the  pro- 
ducts of  our  industry  and  economy,  for  all  of  which,  to  the  ex- 
tent of  the  debt,  no  return  can  be  made.  It  is  indeed  a grievous 
burden,  but  the  compensations  and  offsets  should  be  considered. 
When  the  proceeds  of  foreign  loans  have  become  a part  of  the 
capital  of  the  country  which  is  actively  employed  in  the  work  of 
production,  the  benefits  have  doubtless  been  found  to  exceed  the 
sacrifices — the  benefits,  I mean,  of  borrowing  in  the  foreign  in- 
stead of  the  home  market.  The  remittances  received  in  exchange 
for  the  large  proportion  of  the  bonds  of  the  United  States  trans- 
ferred to  foreign  holders  after  the  war  contributed,  in  an  impor- 
tant degree,  to  replace  the  much  needed  capital  destroyed  in  the 
contest,  and  to  mitigate  the  evils  growing  out  of  the  enormous 
waste.  Had  it  not  been  for  the  blighting  influence  of  a depreci- 
ating currency,  it  is  fair  to  conclude  that  the  capital  thus  obtained 
would  have  earned  more  than  its  cost  in  bonds.  It  is  not  pleas- 
ant to  be  in  debt,  and  share  with  others  your  earnings;  in  itself 
considered,  only  fools  call  it  “ a blessing;”  and  none  but  those 
who  can  employ  productively  more  than  they  own  can  be  justi- 
fied in  becoming  debtors.  But  to  the  individual,  it  matters  little 
where  his  borrowed  capital  comes  from — whether  his  creditor  is 
a fellow-citizen  or  foreigner.  It  is  as  easy  to  pay  £1,000  and  the 
interest  on  it  in  London  as  to  pay  $4,860  and  interest  in  New 
York,  and  easier  if  in  the  former  place  the  interest  be  lower.  It 
is  true,  a portion  of  the  gain  will  go  abroad  if  an  Englishman  or 
German  be  the  lender,  but  the  net  profit  will  remain  as  a clean 
addition  to  the  wealth  of  the  country — an  addition  created  by 
foreign  capital,  and  which  could  not  have  existed  without  its 
agency.  Were  the  needed  loan  obtained  in  our  own  markets, 


capital  would  be  taken  which  was  wanted  in  some  other  business 
while  no  addition  was  made  to  the  aggregate  production  of  the 
country.  Besides  the  net  profit,  new  capital,  whatever  its  sources, 
increases  the  demand  for  laborers,  puts  into  their  hands  the  tools 
of  industry,  introduces  labor-saving  machinery,  augments  the 
rate  of  wages,  and  meliorates  the  condition  of  the  people.  Were 
it  not  for  outside  help  in  the  form  of  loans,  our  resources  as  a 
manufacturing,  mechanical,  agricultural  and  commercial  popula- 
tion would  be  far  more  limited  than  they  now  are.  When  I say 
this,  I do  not  forget  the  reckless,  self-destroying  way  in  which 
we  often  contract  debts.  It  is  a national  infirmity. 

So  long  as  the  interest  of  money  and  the  profits  of  business  are 
much  lower  in  Europe  than  in  this  country,  capital  will  flow 
hitherward  making  a foreign  debt  inevitable,  unless,  indeed,  our 
friends  abroad  choose,  on  second  thought,  to  give  us  what  they 
now  lend.  I imagine  the  amount  will  not  soon  be  largely  re- 
duced, and  that  those  who  would  postpone  specie  redemption  till 
this  is  paid  consent  to  put  it  off  indefinitely.  As  a class,  debtors 
may  be  injured  by  measures  which  appreciate  greenbacks  and 
restore  specie  payment,  but  those  who  owe  pounds  sterling  in 
England  cannot  suffer.  Whatever  may  be  our  standard  of  value, 
and  however  frequently  we  may  change  it  to  promote  swindling 
among  ourselves,  that  by  which  the  obligations  to  outside  parties 
are  measured  is  fixed  by  laws  which,  fortunately  for  them,  we 
cannot  set  aside. 

It  is  a great  mistake  to  suppose  that  a foreign  debt,  or  any 
part  of  it,  must  of  necessity  be  paid  in  gold.  Gold  is  the  meas- 
ure, but  need  not  be  the  medium.  No  stringency,  no  disturbance 
in  the  money  centers  of  England  and  Germany  signalized  the 
borrowing  in  those  markets  of  two  thousand  million  and  its 
transfer,  and  none  in  the  United  States  should  attend  the  pay* 
ment,  in  a business  way,  of  the  like  amount.  As  the  supply  of 
precious  metal  there  was  not  made  inadequate  by  lending 
and  remitting,  so  no  inadequacy  here  should  await  similar  remit- 
tances in  the  way  of  payment.  Unless  our  great  staples  are  too 
dear,  they — probably  they  alone— will  be  taken  as  the  most 
profitable  means  of  satisfying  every  claim.  If  they  cannot  be 
taken  advantageously  to  Europe,  they  may  be,  perhaps,  to  the 
West  Indies  or  South  America,  and  bills  drawn  against  them 
sold  in  London  or  Hamburg.  If  goods,  as  measured  by  gold, 
be  too  high  for  exportation,  the  fact  will  be  indicated  by  an  ad- 


76 


Vance  in  sterling  or  other  exchange.  When  this  advance  has 
reached  the  shipping  point,  coin  or  bullion  will  be  taken  as  the 
cheapest  remittance;  but  this  movement  will  soon  be  checked 
by  the  changes  always  wrought  by  the  transfer.  The  removal 
of  a few  millions  from  one  country  to  another  causes  comparative' 
stringency,  cheaper  production  and  lower  prices  in  the  former, 
and  expansion,  increased  cost  of  production,  and  higher  prices  in 
the  latter.  As  a consequence  of  this  favorable  alteration  in  both 
the  factors  concerned,  the  commodities  which  in  the  treasure- 
exporting country  were  before  too  dear  for  the  foreign  market 
may  be  shipped  with  a profit.  The  same  causes  which  stimulate 
this  movement  of  merchandise  discourage  importations  till  the 
adverse  “balance  of  trade”  is  adjusted,  and  the  whole  debt,  in- 
terest and  principal,  due  and  becoming  due,  is  discharged  or  pro- 
vided for.  This  frequent  shifting  of  specie  (bullion),  leaving 
the  places  where  it  is  degraded  by  excess,  and  going  where  the 
supply  is  scanty  and  the  value  enhanced,  so  adjusts  prices  to  cir- 
cumstances and  special  needs  that  every  people,  not  crushed  by 
government  interference,  is  able  to  furnish  for  commerce  precise- 
ly the  articles  which  natural  or  acquired  advantages — soil,  capi- 
tal, skill,  &c., — best  qualify  it  to  produce  cheaply.  This  move- 
ment, the  effect  of  course  and  not  the  cause  of  the  advantages 
referred  to,  is  entirely  conservative  and  beneficent,  making  for- 
eign trade  both  possible  and  profitable,  and  causing  its  revival 
when  fetters  and  unjust  burdens  have  been  imposed. 

By  the  agency  of  the  precious  metals,  the  industrial  interests  of 
widely  separated  communities  are  placed  and  preserved  in  har- 
monious relation,  while  disturbing  and  hostile  influences  of  every 
kind  are  neutralized  or  counteracted.  When  Congress  for  the 
benefit  of  one  class  and  the  injury  of  another  imposes  unreasona- 
ble duties  on  imports  with  the  intention  of  preventing  the  com- 
petition of  foreign  with  domestic  producers,  the  international 
money,  bullion,  does  all  that  is  possible  to  preserve  trade  and 
repair  damages.  For  a season  gold  is  imported  in  place  of 
heavily  taxed  goods,  but  so  far  as  it  becomes  a part  of  our  cur- 
rency, it  is  wholly  unproductive,  adding  not  the  smallest  fraction 
to  our  capital  or  wealth.  Considered  from  a national  point  of 
view,  the  cotton,  rice,  flour  pork,  etc.,  given  in  exchange  for  it, 
are,  in  an  important  sense,  presented  as  a gratuity  to  our  rivals 
abroad.  A carefully  prepared  inventory  of  all  the  property  in 
each  country,  estimating  everything  by  quantity  and  productive 


11 


power,  would  show  this  result.  In  the  true  sense,  specie  Or 
money  is  not  capital,  as  before  stated,  and  has  no  productive 
power.  The  nation  losing  it  in  the  way  of  business,  loses  nothing; 
the  nation  gaining  it  gains  nothing;  but  trade  is  sustained,  and 
both  parties  are  profited,  in  the  manner  explained. 

Any  considerable  flow  of  gold  to  our  shores,  of  course,  con- 
tracts the  currency  in  other  markets,  and  expands  it  in  our  own, 
giving  “ outside  barbarians  ” unaccustomed  advantages  in  the 
cost  of  production.  With  us,  prices  rise  gradually  till  the  ex- 
cluded and  now  cheapened  commodities  can  be  floated  over  the 
duty  into  our  ports  again  to  compete  with  our  products.  In  the 
interval,  however,  the  protected  classes,  having  got  control  of 
the  much  enlarged  home-market,  are  able  to  obtain  better  prices 
for  their  goods,  and  before  wages  advance,  as  they  ultimately 
must,  to  make  large  gains.  To  the  extent  that  they  are  benefit- 
ed, those  who  provide  exportable  articles  are  damaged.  They 
are  damaged  because  diluted  and  depreciated  money  at  home  in- 
creases their  expenses,  while  the  enhanced  value  of  gold  abroad 
(equivalent  to  a lower  level  of  prices)  compels  them  to  sell  at  a 
sacrifice.  The  producers  of  cotton,  etc.,  in  the  Southern  States, 
who  always  complained  that  a high  tariff  which  put  money  in 
the  pockets  of  northern  manufacturers  did  great  injustice  to  them, 
were  right  in  principle  and  in  fact,  as  erelong  all  will  admit. 

Take  another  view  of  the  foreign  debt  question.  The  par  of 
exchange  on  London  is  say  $4.86;  that  is,  $4.86  in  United  States 
coin  contain  as  much  fine  gold  as  an  English  sovereign,  and  will 
buy  in  New  York  a bill  on  London  for  one  pound  sterling— will, 
I mean  when  exchange  is  at  par,  coinage  free,  and  no  account 
taken  of  the  cost  of  shipping  gold.  Now  this  par,  depending  on 
the  equivalence  of  equal  quantities  of  metal  in  different  pi  aces  • 
is  in  the  nature  of  things  fixed.  Except  temporarily,  whatever 
the  amount  of  foreign  indebtedness,  exchange  can  never  rise 
above  or  fall  below  the  point  named,  except  to  the  extent  of  the 
cost  of  shipping  it,  including  of  course  insurance,  the  loss  of  in- 
terest, etc.  Always  $4.86  in  New  York  will  be  the  natural  equiv- 
alent of  twenty  shillings  in  London.  This  equality  is  not  dis- 
turbed except  when  a floating  debt,  probably  unforseen,  must 
be  paid,  or  international  prices  need  readjusting.  When  once 
disturbed  from  any  cause,  exchange,  so  soon  as  the  disquieting 
influence  is  removed,  and  the  necessary  transfers  of  gold  effected, 
retqrns  to  par,  there  to  remain  until  again  unsettled  by  the  course 


of  trade,  or  the  state  of  the  markets.  An  alien  debt,  once  coti* 
tracted,  requiring  the  payment  of  one  hundred  million  annually, 
in  divided  sums,  at  fixed  periods,  could  have  no  certain  effect. 
Exchange  might  fluctuate  slightly,  moving  up  and  down  to  cor- 
rect the  mistakes  of  merchants,  and  protect  trade  when  momen- 
tarily embarrassed;  but  no  gold  would  be  shipped  merely  be- 
cause a debt  existed.  If  for  a transient  and  special  purpose  the 
metal  were  taken,  it  would  be  returned  when  the  emergency  was 
passed,  and  a profit  could  thereby  be  made.  In  foreign  trade, 
it  performs  the  same  office,  and  is  exported  for  the  same  reason 
as  any  commodity  worth  more  abroad  than  at  home.  From  the 
latter  however,  it  differs  in  one  important  particular.  Tempora- 
rily or  permanently,  in  the  countries  participating  in  the  move- 
ment, it  readjusts  prices  generally  for  the  benefit  of  commerce, 
and  the  good  of  the  people.  Only  debts  already  due,  or  soon 
becoming  due,  causing  an  unusual  demand  for  remittances,  can 
raise  exchange,  stimulate  the  greed  of  exporters,  and  draw  treas- 
ure from  its  resting  places.  In  spite  of  the  large  amount  of  in- 
terest which  we  pay  to  Europe,  equal  to  several  scores  of  millions 
yearly,  and  notwithstanding  we  are  the  largest  producers  of  the 
precious  metals  for  export  in  the  world,  the  balance  of  trade, 
and  the  price  of  foreign  exchange  often  cause  these  metals  to 
flow  hitherward,  as  they  are  doing  now,  and  as  they  have  often 
done  before,  for  short  periods,  in  the  last  twenty-five  years. 
Prime  sterling  sight  bills  are  worth  $4.84,  and  to-day,  November 
4th,  1876,  says  a telegraphic  dispatch,  $860,000  have  been  drawn 
from  the  Bank  of  England,  and  shipped  for  New  York.  The 
merchants  concerned  in  this  movement  are  not  deterred,  in  their 
pursuit  of  gain,  by  the  fact  that  we  owe  to  Europe  a large  fund- 
ed debt— a debt  for  which  the  proper  allowance  has  been  made 
in  every  new  distribution  of  the  gold  supply  by  which  prices  are 
regulated.  The  necessary  payments  are  provided  for  by  mer- 
chants seeking  a profit,  perhaps  without  knowing  their  own 
agency  in  the  matter. 

With  us,  the  present  inward  flow  of  gold  shows  that,  for  the 
moment,  the  relative  specie  prices  of  exportable  goods  are  too 
low  in  this  country  and  too  high  in  England,  and  that  an  equali- 
zation is  demanded  in  the  interest  of  commerce.  When  this  end 
has  been  attained,  a counter  current  may  be  expected—the  old 
outward  current  which,  for  a quarter  of  a century  with  occasional 
short  interruptions,  has  been  setting  towards  the  East,  carrying 


79 


away  the  surplus  product  of  our  mines,  but  leaving  all  which  our 
own  business-interests  require.  If  we  omit  this  surplus  product, 
and  make  the  proper  allowances  for  those  years  in  which  we  have 
paid  interest  or  increased  the  principal  by  more  borrowing,  a 
careful  comparison  will  doubtless  show  that,  since  we  have  owed 
so  much  abroad,  no  more  precious  metal  has  been  exported  than 
imported. 

Whenever  a large  foreign  debt  exists  in  a permanent  form, 
and  borrowing  is  at  an  end,  the  exports  must  steadily  exceed  the 
imports.  On  no  other  condition  can  either  interest  or  principal 
be  paid.  What  is  called  the  “ balance  of  trade” — a balance  to 
be  paid  in  gold  at  the  end,  say,  of  the  financial  year — is  no  more 
likely  to  be  against  than  in  favor  of  the  debtor  country;  nor  can 
the  accruing  interest,  becoming  due  at  regular  periods,  have  any 
effect  after  trade  has  once  been  adjusted  to  the  existing  relations 
of  the  parties.  All  are  provided  for  by  the  foresight  and  sagacity 
of  merchants  and  business  men,  and  such  distribution  of  the  in- 
ternational currency  as  will  make  profitable  the  requisite  excess 
of  exports  over  imports,  is  secured.  Abroad  as  well  as  at  home, 
large  sums  may  be  paid,  if  becoming  due  in  frequent  small  in- 
stallments, without  financial  disorder.  An  adverse  balance, 
happening  under  these  circumstances,  would  be  promptly  dis- 
covered, perhaps  anticipated,  by  those  whose  interests  were  liable 
to  suffer,  when  a sufficient  corrective  could  be  applied.  If  I mis- 
take not,  the  apprehension  of  losing  precious  metal  to  our  injury, 
on  account  of  unfavorable  balances — balances  caused  by  foreign 
indebtedness,  and  the  remittances  required  for  interest — has  no 
substantial  basis,  and  should  not  interfere  with  resumption.  Our 
mines  will  supply  all  we  need  for  every  purpose,  and  more  than 
our  good  demands. 

According  to  the  old  and  once  famous  mercantile  theory,  the 
benefits  derived  from  foreign  commerce  are  wholly  due  to  the 
gold  and  silver  which  may  be  wrung  out  of  it.  These  metals, 
it  was  contended,  are  the  only  true  riches,  and  the  exchauge  of 
commodities  with  other  nations  is  profitable  or  otherwise  in  pro- 
portion as  these  are  gained  or  lost.  Consequently,  true  state- 
manship  consisted  in  the  adoption  and  enforcement  of  measures 
which  will  increase  exports  and  diminish  imports,  thus  securing 
a favorable  balance  of  trade,  and  the  influx  of  the  coveted  metals. 
A war  of  the  custom  houses,  bitter  and  prolonged,  grew  out  of 
these  views.  Strangely  enough,  the  theory,  in  a mitigated  form, 


80 


still  maintains  its  hold  of  certain  minds,  particularly  of  the  com- 
mercial class.  There  are  those  among  us,  men  of  general  intelli- 
gence, who  contend  that  resumption  should  be  deferred  not  only 
till  our  foreign  debts  are  paid,  but  till  a favorable  state  of  the 
exchanges  causes  gold  to  flow,  steadily  and  continuously,  into 
the  country.  Of  course  a flow  of  this  kind  is  impossible,  not  to 
say  undesirable.  No  more  difficult  would  it  be  to  heap  up  indefi- 
nitely the  waters  of  the  Atlantic  on  our  eastern  border,  draining 
the  bays  and  harbors  on  the  other  side.  As  often  as  the  natural 
level  is  disturbed,  the  counter-currents  or  under-tow  will  restore 
the  equilibrium.  Treasure  never  moves,  on  a considerable  scale, 
from  one  place  to  another  except  to  secure  a juster  distribution, 
or  to  equalize  the  supply.  By  an  economic  law  as  persistent  as 
the  desire  for  gain,  the  movement  must  cease  when  the  end  has 
been  attained.  Except  as  local  and  temporary  causes  interfere, 
the  outward  and  inward  flow  must  be  equal.  Legislation  may 
momentarily  change  the  current,  but  it  cannot  abrogate  the  law. 
Nor  would  the  perpetual  influx  of  the  precious  metals,  without 
reference  to  the  legitimate  demand  for  them,  prove  of  the  small- 
est advantage.  On  the  contrary,  it  would  destroy  the  usefulness 
of  the  established  measures  of  value,  and  introduce  evils  of  the 
same  kind  as  those  caused  by  paper  inflation. 

It  must  be  said,  however,  that  in  ordinary  or  healthy  times 
when  gold  is  coming  into  a country,  and  money  is  being  cheap- 
ened, business  is  active  and  trade  prosperous — prosperous,  or 
seemingly  so,  because  prices  move  upward,  debts  are  easily  paid, 
confidence  is  reenforced,  and  a speculative  spirit  generated.  The 
prospect  of  getting  rich  speedily  stimulates  enterprise,  encour- 
ages the  industrious  classes,  and  increases  production.  The  general 
thrift,  temporary  and  often  delusive,  which  results  from  a favor- 
able balance  of  trade,  or  follows  increased  duties  on  importations, 
is  largely  due  to  a sudden  accession  of  precious  metal,  and  the 
consequent  depreciation  of  the  currency.  Prosperity  beginning 
in  this  way,  and  sustained  only  by  cheap  money,  is  usually  tran- 
sient, lasting  only  while  the  tide  is  rising;  but  sometimes  it  runs 
into  more  durable  and  unhealthy  excitement,  ending  perhaps  in 
commercial  disaster. 

A people  having  unusual  facilities  for  production — a rich  soil, 
abundant  capital,  cheap  power,  superior  machinery  and  tools, 
and  skillful  artisans — are  able  to  supply  goods,  particularly  of 
the  manufactured  kind,  in  large  quantity  and  at  small  cost. 


81 


They  have  all  the  elements  of  substantial  wealth,  while  labor  is 
invested  with  extraordinary  efficiency.  The  products  of  industry 
are  greatly  increased,  and  a large  surplus  furnished  for  exchange. 
With  these  advantages,  a rich  country  will  underbid  its  rivals  in 
the  markets  of  the  world,  and  for  a season  sell  more  than  can  be 
paid  for  in  commodities.  When  this  happens  a favorable  balance 
of  trade  is  secured,  and  treasure  begins  to  flow  from  debtor  to 
creditor  to  satisfy  the  claim.  As  specie  accumulates  the  curren- 
cy is  expanded,  prices  rise,  the  nominal,  but  not  the  real  cost 
(cost  in  labor)  of  production  is  enhanced.  This  rise  compels  in- 
dividuals, competing  with  one  another,  to  sell  to  their  customers 
abroad  at  advanced  rates — rates  which  will  defray  the  increased 
nominal  cost.  When  this  point  is  reached,  and  not  before,  the 
richer  country  obtains  the  full  benefit  of  its  peculiar  advantages, 
though  the  individuals  engaged  in  the  trade  get  only  the  usual 
profits.  The  commodities  parted  with  represent  and  contain  in 
the  aggregate  less  labor — fewer  days’  work — than  those  received 
in  exchange.  A yard  of  Cotton  cloth,  the  product  of  the  power 
loom,  and  costing  one  hour’s  work  can  be  sold,  say,  for  a pound 
of  sugar  or  rice  costing  two  or  three  hours’  work.  In  this  man- 
ner England  (and  to  some  extent  New  England)  gains  the  just 
reward  of  her  industrial  and  inventive  preeminence.  Her  amaz- 
ing fecundity  in  the  manufacturing  line,  due  largely  to  cheap 
coal  and  iron,  has  enabled  her,  to  a notable  extent,  to  supply  the 
world,  and  secure  great  wealth.  She  has  drawn  to  herself  a lib- 
eral share  of  the  precious  metals,  and  maintains  at  home  a high 
range  of  prices  in  order  that  she  may  gather  without  loss  the 
fruits  of  industrial  superiority.  Her  gain  is  not  secured  at  the 
expense  of  others,  as  popularly  supposed,  but  is  the  fitting  rec- 
ompense of  genius,  energy  and  improved  methods.  Those  who 
trade  with  her  promote  their  own  interest,  getting  more  goods — ■ 
more  of  the  comforts  and  conveniences  of  life — than  they  could 
otherwise  obtain.  If  they  give  two  or  three  days’  work  for  one, 
they  pay  the  honest  difference  only  between  skilled  and  unskilled, 
efficient  and  inefficient  labor — between  labor  yielding  a large  pro- 
duct and  labor  yielding  a small  one.  Under  a free  trade  system 
both  sides  are  benefited,  or  the  interchange  would  not  be  made. 
In  no  case  does  the  fact  that  labor  is  unremunerative  in  one 
country  as  compared  with  another  prevent  a mutually  gainful 
trade.  Nor  can  the  claim  be  sustained  that  low  wages,  nominal 
or  real,  necessarily  give  to  a people  important  manufacturing  and 

II 


82 


commercial  advantages — advantages  which  those  paying  higher 
wages  can  wisely  attempt  to  destroy  by  oppressive  tariff  laws. 
Money-wages  are,  in  truth,  high  or  low  in  different  countries 
(made  so  by  a just  apportionment  of  the  gold  and  silver  of  the 
world)  that  trade  may  be  successfully  prosecuted,  and  each  com- 
munity make  the  most  of  its  peculiar  facilities  for  production. 
Legislation  which  shuts  out  foreign  goods  without  stopping  the 
exports  has  in  fact  a direct  tendency  to  lower  the  price  of  labor 
abroad,  and  otherwise  increase  the  supposed  embarrassment 
which  protective  legislation  is  intended  to  remove. 

In  this  discussion,  I have  often  referred  to  the  fact  that  gold 
and  silver  are  products  of  this  country.  An  enormous  amount — 
nearly  ninety  million  in  value  annually — are  taken  from  our 
mines,  all  of  which,  except  the  small  proportion  which  is  em- 
ployed in  the  arts,  and  coined  for  the  uses  of  the  treasury  and 
certain  western  specie-paying  states,  goes  to  swell  our  exports. 
Of  course  it  goes  as  bullion  or  merchandise.  It  is  a part  of  our 
surplus  production  for  which  there  is  no  need  or  adequate  demand 
at  home.  Under  present  circumstances,  or  till  we  resume  pay- 
ment in  coin,  or  in  some  other  way  multiply  its  uses,  it  is  impos- 
sible it  should  remain.  In  parting  with  it,  we  cancel  obligations 
and  lose  nothing;  or  in  exchange  for  it  obtain  capital  which,  if 
employed  productively,  will  support  laborers  and  yield  a profit. 
Did  it  become  a part  of  the  circulating  medium,  even  though  we 
were  now  on  a coin  basis,  it  would  not  add  to  the  comforts 
and  conveniences  of  the  people.  So  far,  indeed,  as  it  took  this 
direction,  it  might,  for  reasons  often  repeated,  be  better  sunk  in 
mid-ocean.  Except  to  the  extent  of  certain  additions  required 
by  increased  population  and  trade — required  to  preserve  uniform- 
ity in  the  standard  of  value — the  world  has  gained  nothing  by 
all  the  precious  metal  poured  into  the  circulation  in  the  last 
twenth-eight  years.  Trinkets  and  certain  ornaments  and  utensils 
of  very  limited  utility  have  thereby  been  made  cheaper,  and  con- 
sequently more  accessible;  but  this  can  scarcely  be  said  of  any 
article  of  prime  or  even  secondary  importance.  Nor,  as  a result, 
have  men  become  wiser  and  better.  On  the  contrary,  a specu- 
lating spirit  has  been  engendered,  greed,  dishonesty  and  extrava- 
gance encouraged,  and  industry  diverted  to  unprofitable  enter- 
prises. The  manifold  evils  more  directly  traceable  to  paper 
money  inflation  have  no  doubt  been  intensified  by  the  rich  min- 
eral discoveries  in  California  and  Nevada.  In  a certain  sense, 


83 


however,  this  country  has  been  largely  profited  by  its  gold  and 
silver  mines.  An  important  and  productive  industry  has  been 
added  to  those  before  in  existence,  but  the  benefits  conferred  are 
by  no  means  as  great  as  those  coming  from  the  increased  abun- 
dance of  the  more  useful  metals.  It  is  more  desirable  to  have 
cheap  coal,  iron,  copper,  spelter,  lead,  etc.,  than  cheap  gold  and 
silver. 


VIII. 

Commercial  Crises  viewed  as  Epidemics. 

There  are  certain  familiar  diseases  which  appear  periodically 
and  spread  rapidly,  involving  large  populations  and  running  a 
definite  career,  which,  on  account  of  their  general  prevalence,  are 
called  epidemics.  Among  them  may  be  named  influenza,  mea- 
sles, hooping  cough,  cholera,  the  meningitis  spinalis  of  horses, 
etc.  Some  of  them,  if  not  all,  are  contagious.  The  mind,  like 
the  body,  is  vexed  by  epidemic  influences;  has  its  periodic  dis- 
turbances and  critical  seasons.  It  does  not  long  or  often  move 
on  in  a straight  line,  with  even  step,  but  pursues  a devious,  inter- 
mittent and  spasmodic  course.  Periods  of  activity  and  rest, 
of  excitement  and  indifference,  confidence  and  doubt,  hope  and 
fear,  in  perpetual  alternation,  have  always  marked  its  history, 
and  forever  must  till  human  nature  changes.  There  is  a constant 
ebbing  and  flowing  with  occasional  spring  tides  and  neap  tides 
to  relieve  the  monotony.  The  feelings,  sentiments  and  passions 
are  most  conspicuously  and  profoundly  affected,  now  blazing  up 
fiercely,  then  dying  away  exhausted,  like  a burning  hay-stack 
when  the  wind  is  fitful.  All  the  faculties,  however,  including 
those  which  make  man  a rational  being,  and  should  control  con- 
duct, are  involved.  The  judgment  is  warped,  the  vision  distort-  1 
ed,  reality  exaggerated,  and  fancy  mistaken  for  fact.  Under 
these  circumstances,  men  become  the  prey  of  impostors  and  en- 
thusiasts. 

From  the  fact  that  the  periodic  excitements  referred  to  have 
their  origin  and  seat  chiefly  in  man’s  social  and  moral  natures, 
they  have  been  called  moral  epidemics,  or  epidemic  delusions. 


B4 


They  attack  different  classes,  but  with  most  frequency  the  cred- 
ulous, the  imaginative,  the  fervid,  those  having  active  nervous 
systems  and  the  fanatical  temperament.  Once  introduced,  they 
spread  by  contagion;  that  is,  one  catches  the  prevailing  disorder 
from  another  till  the  community  is  made  wild  by  the  reigning 
epidemic.  Sympathy,  example  and  the  imitative  faculty — the 
almost  irresistable  tendency  to  feel,  think  and  act  as  others  do- 
open  a channel  by  which  the  malady  passes  easily  from  one  mind, 
one  organism,  to  another.  Moral  like  other  epidemics  run  a defi- 
nite, self-limited  course,  terminate  in  a prescribed  way,  travel 
most  frequently  in  groups  and  in  serial  order,  and  return  at  in- 
tervals more  or  less  regular.  Unlike  the  subjects  of  measles, 
hooping  cough,  etc.,  those  once  afflicted  are  susceptible  to  second 
and  third  attacks,  and  do  in  fact  sicken  as  often  as  exposed.  By 
constitution  and  temperament,  they  are  naturally  predisposed  to 
this  class  of  disorders,  often  receiving  them  in  a friendly  spirit 
as  if  pleasurable  excitement  were  expected.  They  are  of  differ- 
ent kinds,  political,  religious,  reformatory,  financial,  etc.,  accord- 
ing to  the  emotions  awakened,  and  the  kind  of  hallucination  pre- 
vailing. The  noblest  and  best  as  well  as  the  meanest  and  worst 
qualities  of  the  human  character  are  at  different  times  displayed. 
They  end  in  wars,  revolutions,  persecutions  and  carnivals  of 
crime;  sometimes  in  deeds  of  heroism,  reformation  and  the  over- 
throw of  abuses.  They  will  take  any  proposed  direction,  if  ex- 
cited passion  but  lead  the  way. 

Among  the  most  remarkable  of  the  epidemics  about  which  I 
now  write  may  be  named  those  which  swept  southern  and  west- 
ern Europe  in  the  time  of  the  crusades,  precipitating  on  Palestine 
the  maddened  Christian  hosts  in  successive  military  expeditions 
organized  to  expel  the  infidel  Turks  from  the  Holy  city.  The 
persecutions  and  massacres  which  have  marked  the  domination 
of  particular  religious  sects  at  different  times  have  had  a similar 
origin  and  character.  In  every  age,  whenever  a reformation  of 
a radical  character  and  on  a considerable  scale  was  to  be  secured, 
religious  zeal  rekindled,  or  a new  faith  or  sect  introduced,  the 
instrumentalities  known  to  be  active  in  originating  and  spreading 
epidemics  have  been  invoked.  By  similar  means  were  brought 
forth  and  diffused  the  witchcraft  delusions  of  Europe  and  America, 
the  popular  phrensy  which  preceded  and  attended  the  French 
Revolution  of  the  last  century,  and  the  Mesmeric  lunacy  which 
broke  out  in  Paris  in  1773,  and  in  this  country  forty  years  ago. 


85 


In  some  epidemics,  the  morbid  element  (which  may  be  detected 
in  all)  is  particularly  conspicuous.  This  was  the  fact  in  one 
which  appeared  among  a persecuted  religious  sect  in  the  south 
of  France.  The  worshipers,  known  as  the  “Trembleurs  de  Ce 
venues,”  were  seized  with  trembling  and  convulsive  movements 
which  proved  contagious.  A disorder  of  a similar  nature,  with 
modified  symptoms,  the  effect  of  “ sensational  preaching  ” and  sym- 
pathy or  contagion,  broke  out  in  Scotland  in  1742,  in  Kentucky 
in  the  first  years  of  the  present  century,  and  in  other  places  at 
different  times.  An  examination  of  the  records  of  crime,  etc., 
will  show  that  homicide,  suicide,*  incendiarism,  poisoning  and 
other  offences  are  also  epidemic  and  contagious.  The  furor  of  a 
presidential  election  is,  with  us,  a regularly  recurring  epidemic, 
sometimes  of  a malignant  type. 

Had  the  events  which  followed  the  last  presidential  election — 
those  connected  with  the  “returning  boards”  and  the  electoral 
commission — happened  at  another  time,  when  the  public  mind 
was  predisposed  to  and  prepared  for  an  epidemic  madness,  wait- 
ing impatiently  perhaps  for  an  “exciting  cause”  or  occasion,  we 
should  doubtless  have  had  a quarrel  for  the  succession,  and  possi- 
bly a civil  war.  Our  recent  memorable  experiences  in  the  war- 
line, and  the  general  business-depression  and  discouragement 
perhaps  saved  us.  Crushed  as  we  now  are  by  our  own  folly,  no 
wide-spread  excitement  will  take  hold  of  the  people  which  does 
not  harmonize  with  the  general  gloom.  A panic  in  a crowded 
church  or  theatre  would  take  well;  possibly  a religious  excite- 
ment might  be  started,  but  in  the  last  case  the  preachers  would 
succeed  least  by  setting  forth  the  terrors  of  the  law,  using  liber- 
ally the  sulphurous  element. 

In  the  earlier  stages  of  society,  when  the  people  had  few  wants 
and  but  little  surplus  wealth,  before  capital,  on  a considerable 
scale,  was  employed  to  give  efficiency  to  labor,,  financial  or  com- 
mercial epidemics  were  unknown.  When  every  man  was  a com- 
mon laborer,  producing  with  the  fewest  and  cheapest  tools,  or 

* The  following  is  taken  from  a New  York  newspaper  : “It  is  such  an  easy  matter  to 
get  out  of  the  world  that  it  is  strange  that  people  make  such  hard  work  of  it— especially 
in  hot  weather.  During  the  past  month  Paris  green  has  been  used  in  nineteen  out,  of 
twenty  cases  of  suicide  that  have  occurred  in  New  York,  Brooklyn,  and  Jersey  City.  In 
suicide  personal  comfort  is  generally  sacrificed  to  fashion.  The  Pont  Neuf  and  the  Lon- 
don bridge  became  popular  passage-ways  to  death  soon  after  they  were  built.  The  sus- 
pension bridge  at  Cincinnati  was  barely  finished  when  a man  ended  his  life  by  jumping 
from  it,  and  for  a long  time  three  out  of  four  suicides  in  that  city  were  committed  in  the 
same  way.  Paris  green  will  probably  have  the  “run  ” here  until  the  East  River  bridge  is 
completed.” 


86 


procuring  by  single  exchange,  all  he  consumed,  the  imagination 
was  not  excited  by  visions  of  prospective  and  indefinite  riches. 
Growing  and  stored  crops  for  the  year,  scanty  fiocks  and  herds, 
a few  beasts  of  burden,  and  land  enough  for  their  subsistence, 
with  the  simplest  clothing  and  shelter,  were  all  they  sought  with 
expectation,  and  more  than ' they  could  acquire  without  the 
severest  toil  and  privation.  But  when  capital  became  an  impor- 
tant instrument  of  production,  making  possible  the  utilization  of 
the  natural  forces,  and  the  introduction  of  machinery  and  num- 
berless labor-saving  appliances,  multiplying  and  cheapening  the 
products  of  industry  often  a hundred  or  a thousand  fold,  and 
placing  within  reach  the  vast  resources  of  commerce,  a way  was 
opened  and  inducements  offered  for  extraordinary  accumulations. 
At  the  same  time,  a new  class  of  workers  was  added  to  those  be- 
fore in  existence;  I mean  the  distributors  of  wealth,  or  middle- 
men, sometimes  so  called.  They  are  a necessary  part  of  the 
economic  system,  more  important  as  society  advances,  but,  from 
their  position  and  opportunities,  somewhat  dangerous  to  business 
interests,  and  the  welfare  of  the  other  classes.  When  discharg- 
ing their  proper  functions  as  merchants,  brokers,  bankers,  etc., 
passing  over  from  producers  to  consumers  the  proceeds  of  indus- 
try, they  perform  an  essential  service,  adding  to  substantial  value, 
or  saving  in  needful  expenses,  the  full  amount  of  their  charges 
(toll).  But  too  often  they  forget  their  regular  duties,  and  usurp 
another  office.  Like  others  who  are  largely  paid,  they  are  fre- 
quently smitten  with  cupidity — a consuming  desire  to  gain  wealth 
without  earning  it.  They  attempt  monopoly,  or  buy  on  specula- 
tion, and  sell,  not  to  consumers,  but  to  speculators  like  themselves, 
using  credit  largely  to  supply  the  means.  Their  peculiar  rela- 
tions to  the  credit  system  and  moneyed  institutions  of  the  country, 
when  taken  in  connection  with  their  needful,  perhaps  speculative 
risks,  expose  them  to  unwelcome  surprises  and  dangerous  reverses. 
Among  them,  financial  or  commercial  epidemics  always  begin, 
and  under  their  management  run  their  appointed  courses.  lo 
this  class,  panic,  when  it  comes,  is  most  disastrous,  though  other 
parties  more  blameless  suffer  severely. 

Incidentally,  on  several  occasions  in  the  course  of  this  paper, 
I have  referred  to  some  of  the  leading  phonomena  which  attend 
the  financial  epidemic.  Collectively,  they  constitute  a disorder 
of  a peculiar  kind  with  unique  symptoms.  Recent  occurrencies 
have  made  them  a too  familiar  group.  Distinctly,  as  they  appear 


87 


in  the  individual,  they  are  of  a morbid  character,  and  follow  one 
another  in  a determinate  order,  the  series  recurring  at  intervals 
with  an  approach  to  regularity.  The  following  have  been  mem- 
orable periods  in  modern  financial  history:  1816,  1825,  1837,  1847, 
1857,  1866,  1873,  the  periods  (in  consequence,  seemingly,  of 
special  local  influences  causing  acceleration  or  retardation)  ex- 
ceeding slightly  or  falling  a little  short  of  ten  years.  The  aver- 
age up  to  1866  (the  last  time  that  the  Bank  of  England  was 
authorized  to  issue  notes  in  excess  of  the  statute-limit)  was  just 
ten  years.  What  is  called  the  crisis  which  immediately  precedes 
the  panic,  graphically  so  called,  marks  the  culmination  of  the 
epidemic.  It  introduces  the  last,  most  painful  and  appalling  of 
a series  of  changes  each  of  which  is  dependent  on  the  conditions 
which  have  preceded  it.  The  morbid  mental  state  which  is  the 
characteristic  of  panic,  contagious  as  it  is  in  the  highest  degree, 
spreads  with  marvellous  rapidity,  using  the  telegraphic  wires  as 
the  vehicle  for  the  more  distant  places.  In  an  able  paper,  in 
“The  Fortnightly  Review,”  Mr.  Horace  White  notes  the  fact 
that  the  Anglo  Saxon  and  Teutonic  races  are  the  most  severe 
sufferers  from  commercial  epidemics.  The  French  are  nearly 
exempt  from  attack. 

The  financial  distemper,  like  the  ordinary  febrile  disease,  may 
properly  be  said  to  have  three  stages,  one  characterized  by  de- 
pression, another  by  reaction  or  excitement,  and  another  by  col- 
lapse and  debility.  That  which  may  be  called  the  first  or  intro- 
ductory stage  grows  out  of  the  shock  which  the  nervous  system 
has  received  at  the  winding  up  of  the  preceding  epidemic.  The 
panic  and  the  external  changes  immediately  connected  with  it 
have  produced  temporary  lesions  in  the  nervous  centres,  modify- 
ing the  mental  constitution,  and  giving  exaggerated  views  of  the 
business  world,  and  one’s  position  in  it.  Men  of  the  sanguine 
temperament,  who  have  seemingly  been  driving  a prosperous 
trade,  building  larger  every  year,  and  gathering  treasure  and 
distinction,  find  the  work  of  half  a life-time  tumbling  about  their 
ears,  their  fortunes  wrecked  an$  their  hopes  blasted.  Of  course 
they  are  sick,  and  greatly  disheartened.  Property  which,  a short 
time  before,  was  supposed  sufficient  to  make  the  owner  rich  will 
not  sell  for  enough  to  discharge  the  liens  or  mortgages.  Prices 
have  fallen  ruinously  so  that  producers  have  been  unable  to  make 
and  sell  goods  without  severe  losses.  Fearing  the  worst,  and 
knowing  that  insolvency  is  the  penalty  for  mistake,  they  hesitate 


and  delay,  while  buyers  for  the  same  reason  first  postpone,  then 
stint  their  purchases.  Everything  has  gone  and  is  still  going 
down  except  taxes,  which  politicians  contrive  to  maintain.  Un- 
der these  circumstances,  labor  finds  scanty  employment  at  reduced 
wages.  Of  all  goods  seeking  a market  the  sale  is  painfully  slow, 
and  at  unremunerative  prices.  The  slack  demand,  the  greatly 
reduced  consumption,  and  the  severe  economy  practiced  in  all 
directions,  make  the  supply,  however  limited,  in  excess  of  the 
wants  of  the  buying  and  paying  public.  Of  course  industry  lan- 
guishes, business  droops,  and  enterprise  is  extinct.  Further 
losses  are  apprehended  whatever  course  is  pursued.  Occasion- 
ally, perhaps,  the  prospect  has  improved,  and  men  been  tempted 
to  spend  money,  and  prepare  for  a more  active  trade;  but  in  such 
cases  expectations  have  been  disappointed,  and  those  making 
ventures  cheated  by  their  hopes  and  impatience.  Consequently, 
all  are  discouraged,  doing  best  seemingly  when  doing  least.  So 
long  as  prices  are  still  falling,  the  whole  business  population — 
those  engaged  in  producing  for  the  market,  or  in  distributing  the 
wealth  which  others  create — are  practically  helpless — helpless  till 
the  bottom  is  reached.  They  are  so  because  they  cannot  control 
the  circumstances  which  determine  the  downward  movement. 
It  is  economically  impossible  for  either  class  to  discharge  its 
office,  or  long  maintain  financial  existence  when  goods  or  prop- 
erty exposed  for  sale  will  not  bring  cost.  If  cost  be  not  obtained 
there  is  not  only  individual  bankruptcy,  but  a rapid  destruction 
of  capital — one  of  the  industrial  forces — without  which  labor 
has  no  efficiency,  and  prQduction  is  at  an  end. 

At  the  present  moment,  we  are  in  a condition  not  unlike  that 
described.  We  have  passed  through  the  several  stages  of  one  of 
the  severest  commercial  epidemics  on  record.  Though  bruised 
and  bleeding,  and  not  a little  crest-fallen,  as  a people  we  have  so 
far  survived  the  attack  and  its  consequences.  A few  have  gone 
into  the  insane  asylums  or  taken  Paris  green;  many  have  felt  the 
pangs  and  the  sorrows  which  come  after  intoxication— the  “hor- 
rors,” so  called,  of  delirium  trerpens — and  all  are  now  very  far 
advanced  in  the  stage  of  exhausted  vitality  and  collapse.  Of  re- 
covery there  are  yet  no  decisive  symptoms.  For  four  successive 
seasons  our  financial  doctors  have  promised  speedy  convalescence, 
and  as  often  have  announced  the  signs  which  foretell  improve- 
ment, but  results  have  shown  they  were  arrant  pretenders  and 
quacks.  No  doubt  the  better  time  is  coming,  perhaps  is  just  at 


89 


hand.  When  at  last  it  arrives,  the  later,  more  lucky,  but  per- 
haps not  wiser  prophets  will  be  accounted  seers.  Consumption 
on  a considerable  scale,  it  will  be  remembered,  particularly  of 
those  articles  which  supply  the  primary  wants  of  the  people,  is 
all  the  time  going  on,  while  production,  owing  to  extreme  caution, 
is  largely  suspended.  When,  at  length,  by  the  unequal  action 
of  these  opposing  forces,  a comparatively  glutted  market  is  re- 
lieved, prices  will  improve,  and  goods  can  be  made  and  disposed 
of  at  a profit.  Then,  and  not  before,  those  engaged  in  business, 
having  learned  economy  and  cut  down  expenses,  will  be  able  to 
go  forward  with  more  assurance.  Till  all  classes  interested  in 
sustaining  prices  have  come  down  to  the  normal  level,  consented 
to  temporary  sacrifices,  and  made  the  needful  reforms,  there  can 
be  no  advantage  in  starting  or  trying  to  start  business.  Prema- 
ture efforts  will  inevitably  fail  as  they  have  done  repeatedly  in 
the  last  three  years,  and  as  they  did  still  more  disastrously  in 
1838,  preparatory  to  the  second  and  final  break-down  in  1839. 
Combinations,  trades-unions  and  other  desperate  expedients  may, 
in  certain  cases,  and  for  a little  time,  save  individuals  from  their 
share  of  the  needful  losses;  but  they  cannot  avert  the  unwelcome 
necessity,  much  more  abrogate  a natural  law.  Had  all  classes 
forty  months  ago  submitted  to  the  inevitable,  and  at  once  made  the 
sacrifices  (in  many  cases  more  apparent  than  real)  they  have  since 
vainly  strived  to  escape,  we  might  long  since  have  greeted  the 
more  prosperous  season  for  which  we  are  waiting.  Had  business- 
men, at  that  time,  pursued  this  course,  remembering  that  price 
is  nominal,  not  real — that  the  profits  of  capital  and  wages  of 
labor  are  not  determined  by  the  money  received  but  by  the  com- 
modities, including  food,  clothing,  shelter,  etc.,  for  which  that 
money  will  exchange,  there  would  have  been  no  subsequent  loss- 
es on  the  part  of  producers  except  such  as  grew  out  of  the  tem- 
porary stagnation  in  trade.  If  every  dollar  which  a man  gets 
to-day  will  purchase  as  much  as  two  dollars  would  procure  four 
years  ago,  it  is  difficult  to  see  how  his  condition  is  made  worse. 
The  ready  and  sufficient  excuse  for  the  different  course  pursued 
is  found  in  the  fact  that  the  people  have  been  crazed,  sick  and  in 
affliction,  not  knowing  what  their  best  good  required.  Their 
minds  have  been  bewildered,  their  heads  made  giddy  by  the  ex- 
citing delusions  of  the  past.  They  could  not  think  complacent- 
ly of  coming  down  in  anything;  and  not  till  compulsion  has 
braced  up  the  resolution  have  any  needful  concessions  been  made. 

12 


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It  is  not  strange  that  many  have  mistaken  the  cause  of  the 
hard  times,  and,  turning  away  from  an  unpalatable  remedy,  have 
so  long  neglected  to  make  the  needful  sacrifices,  looking  for  re- 
lief in  the  mean  time  to  some  juggling  legislation  which  will  un- 
settle values.  Contrary  to  an  opinion  which  prevailed  extensive- 
ly three  years  ago,  it  is  now  known  that  cheapening  the  currency, 
in  a time  of  business  depression,  can  have  no  tendency  to  restore 
trade  and  prosperity.  It  will  not  stimulate  production,  or  give 
work  to  laborers,  because  it  cannot  create  a demand  for  the  pro- 
ducts of  industry.  There  are  already  in  the  market  more  goods 
than  can  be  sold  at  a profit,  and  any  considerable  addition  would 
knock  down  prices,  and  make  necessary  still  greater  sacrifices. 
There  is  more  than  enough  money  at  the  present  time  for  the 
transaction  of  all  the  business  which  offers — more  than  enough 
to  run  all  the  iron-mills,  factories,  steam-vessels,  freight  trains 
and  merchant-houses  which  can  be  run  without  loss.  If  more 
were  issued,  it  could  not  be  profitably  employed,  and  could  not 
be  loaned  to  solvent  men — to  men  who  would  promptly  return 
it,  with  interest,  when  wanted.  President  Grant  and  Secretary 
Richardson,  three  years  ago,  without  the  authority  of  law,  tried 
to  restore  health  by  the  issue  of  twenty-six  million  of  greenbacks, 
but  failed  signally  and  disgracefully,  as  those  better  informed 
anticipated.  The  first  legal  tenders  which  were  put  in  cir- 
culation in  1862  acted  as  a spur  to  business  because  the  condi- 
tion of  the  country  was  wholly  different.  Then  the  government 
was  the  chief  support  of  trade.  It  had  taken  a big  contract.  It 
borrowed  capital  on  an  enormous  scale,  employed  half  a million 
laborers  to  do  its  bloody  work,  became  the  great  purchaser,  con- 
sumer and  wrecker  of  the  products  of  industry,  and  furnished 
the  active  demand  now  so  conspicuously  wanting.  Under  the 
circumstances  named  business  in  general  could  not  long  be  stag- 
nant. 

The  phenomena  which  mark  the  decline  of  one  nearly  spent 
commercial  epidemic  are  much  the  same  as  those  which  signalize 
the  approach  of  another.  Notably,  they  attend  our  present  con- 
dition. We  are  now  passing  through  a transition  stage,  filling 
up  with  lamentations  the  weary  interval  between  the  outgoing 
and  incoming  tides.  No  movement  is  yet  apparent,  but  clearly 
the  nervous  depression,  discouragement,  lack  of  confidence  (not 
so  much  in  men  as  in  prices),  and  flagging  energy  in  all  direc- 
tions so  characteristic  of  the  times,  must  erelong,  in  virtue  of  a 


91 


well  known  physiological  law,  give  place  to  reaction.  When 
sufficient  vitality  remains,  all  the  morbid  states  of  the  system 
distinguished  by  the  symptoms  named  are  followed  by  a counter 
or  reactive  movement  designed  to  repair  the  damage  which  the 
nervous  centres  have  received.  In  regular  febrile  diseases,  this 
reaction  is  attended  by  unnatural  and  conspicuous  activity  in  the 
blood-vessels;  but  if  the  disorder  be  seated  in  the  organs  control- 
ling the  moral  nature,  the  sanguine  excitement  may  not  be  im- 
portant. However  this  may  be,  relief  should  be  expected  when- 
ever falling  prices  have  gone  far  enough  to  guarantee  reaction 
without  relapse.  When  the  returning  flow  of  vital  energy,  an- 
swering to  outward  change,  has  reinforced  and  repaired  the 
injured  nervous  tissues,  then  shall  we  be  lifted  from  the  u slough 
of  despond.”  Then  will  come  hope,  courage,  enterprise  and  busi- 
ness prosperity,  putting  an  end  to  the  torpor  and  general  par- 
alysis to-day  so  apparent.  It  is  quite  possible,  indeed,  highly 
probable,  that  declining  values,  owing  to  distrust  of  the  future, 
may  proceed  further  than  necessity  requires  before  restoring 
production  and  trade  to  their  accustomed  activity;  but  should 
this  happen,  recovery,  when  once  a beginning  is  made,  will  be 
more  rapid  than  otherwise,  and  less  liable  to  interruptions. 

Always  when  the  stage  of  nervous  depression  has  been  pro- 
longed and  severe,  reaction,  like  the  returning  tidal  wave,  tends 
to  pass  beyond  the  normal  limit.  When  this  tendency  becomes 
reality,  the  second  and  most  remarkable  stage  of  the  epidemic  is 
begun.  The  symptoms  again  become  morbid,  morbid  from  ex- 
citement; and  in  accordance  with  a well  understood  law,  are 
measurably  more  active  in  proportion  to  the  severity  of  the 
preceding  stage.  The  invariable  external  condition  which  signal- 
izes the  progress  of  reaction  from  the  moderate  to  the  vehe- 
ment will  be  found  in  the  steadily  advancing  prices — a sure  and 
exhilarating  upward  movement  in  place  of  the  disheartening 
downward  tending  of  an  earlier  period.  This  persistent  rise  of 
money  values  makes  the  holders  and  purchasers  of  property  and 
middle  men  for  the  time  prosperous,  and  all  classes  happy.  Men 
forget  their  misery,  become  resolute  and  go  to  work  with  a will. 
Production  is  largely  increased,  sales  are  quickly  made,  consump- 
tion is  proportionally  active,  profits  are  again  remunerative  and 
wages  satisfactory.  Mills  lately  “ running  on  half  time  ” are 
fully  employed,  the  hum  of  industry  is  heard  every  where,  while 
the  marts  of  commerce  are  thronged  with  trading  people.  The 


92 


hopeful  prospect  begets  confident  expectation  and  restlessness 
leading  to  new  enterprises. 

Rising  prices  then,  are  the  outward  and  immediate  cause  of 
reviving  business,  while  reaction  which,  by  an  organic  law,  fol- 
lows and  removes  nervous  depression,  is  the  inward,  more  funda- 
mental cause.  These  augmented  prices  are  of  course  equivalent 
to  a depreciation  of  the  currency,  but  those  who  supply  the 
money  market  are  compensated  by  the  enhanced  rate  of  interest 
resulting  from  the  new  demand  for  loans.  Did  the  advancing 
movement  cease  when  the  natural  level  had  been  reached,  no 
harm,  but  unmixed  good  would  ensue;  but  unfortunately  there 
is  usually  no  halt  at  that  point  unless  for  a brief  period.  In  a 
particular  fever,  the  malady  is  not  at  an  end  when  the  chills, 
nausea,  neuralgic  pains  and  other  symptoms  of  depression  give 
place  to  returning  heat  and  the  modified  relief  of  the  second  stage. 
The  hope,  sometimes  favored  by  appearances,  that  reaction 
will  not  do  more  than  restore  healthy  excitement  is  deceptive. 
So  in  a financial  epidemic;  the  movement  which  inspires  courage 
and  carries  up  prices  to  the  normal  standard,  does  not  stop  there, 
but  goes  on  to  produce  new  chauges — seductive  but  dangerous 
disturbances.  The  mischief  wrought  dates  from  the  period  when 
speculation  begins — when  men  buy  not  for  distribution,  or  in  the 
way  of  business,  but  to  hold  temporarily  for  an  advance,  bidding 
against  one  another  in  the  market,  and  running  up  money  values. 
When  the  speculative  element,  in  considerable  proportion,  enters 
into  business,  all  the  evils  which  belong  to  a commercial  epide- 
mic are  let  loose,  and  a financial  crises  becomes  inevitable.  The 
symptoms  are  distinctly,  sometimes  intensely  morbid,  and  the 
disease  ouce  established,  must  run  its  course.  The  end  is  ex- 
plosion, disruption,  panic. 

It  will  not  be  necessary  to  repeat  at  length  what  I have  writ- 
ten in  other  places  concerning  the  phenomena  and  conclusion  of 
the  second  stage  of  the  financial  malady,  the  special  circum- 
stances which  increase  or  mitigate  its  violence,  the  effect  of 
paper  money  in  facilitating  its  progress,  or  of  an  inflexible  in- 
convertible currency  in  making  more  destructive  the  final  catas- 
trophe. Of  antidotes  and  peremptory  remedies  there  are  none. 
Of  means  to  alleviate,  however,  we  are  not  destitute.  These  are 
more  effectual  than  in  influenza,  measles  or  small  pox,  but  are 
not  always  successful.  Of  course  no  curative  agent  will  abrupt 
ly,  while  its  essential  conditions  remain,  cut  short  the  distemper 


93 


in  any  of  its  stages.  Specifics  are  not  known,  though  mack 
remedies  abound. 

In  the  way  of  palliative  treatment,  the  first  stage — that  of  ex 
haustion  and  depression— demands  mild  stimulants,  exhilarants, 
nervines,  tonics,  and  the  usual  means  to  sustain  the  courage, 
keep  alive  hope,  and  incline  the  sufferers  to  make  promptly  the 
required  sacrifices.  In  the  second  stage — that  of  reaction — re- 
frigerants, sedatives  and  depletion  are  called  for.  The  indications 
(in  medical  phrase)  are  to  moderate  the  cerebral  excitement, 
control  the  speculating  proclivity,  and  restrict  or  curb  prices. 
These  may  all  be  met,  and  the  proposed  ends  attained  (if  attain- 
able) by  the  same  remedies.  Manifestly,  the  heated  brain  needs 
cooling  applications;  the  too  active  cerebral  functions  sedative 
and  repressive  treatment;  but  usually,  the  aid  of  the  physician, 
armed  with  the  implements  of  torture — blisters,  setons  and  the 
lancet — is  not  asked.  Most  likely  his  advice,  if  given,  would  be 
spurned.  Were  a prescription  desired,  some  financial  charlatan, 
some  noted  Dr.  Leech,  broker,  loan-agent  and  speculator,  would 
naturally  be  consulted.  Relief  then  must  be  sought  from 
another  quarter.  Effects  (symptoms)  must  be  modified  l»y 
means  which  control  causes  and  conditions;  measures  taken  to 
govern  trade,  and  through  trade  to  suppress  the  exuberance  of 
traders.  Not  easily  can  all  buy  and  sell  on  an  enlarged  scale — 
cannot  without  embarrassment  speculate  successfully,  or  extend 
their  credit,  or  by  competition  run  up  prices  extravagantly — with- 
out an  increased  supply  of  money,  or  in  a stringent  condition 
of  the  money  market.  Money  is,  in  an  important  sense,  the 
blood  of  the  economic  system,  the  circulating  medium  which 
gives  li  t<>  commerce  and  exchange.  Whoever  controls  the  cur- 
rency has  an  instrument  equal  in  efficiency  to  the  lancet  in  the 
hands  of  the  physician.  Largely  in  either  case,  the  manipulator 
holds  the  issues  of  life  and  death.  Primarily,  the  government 
provide  the  currency,  or  determines  what  it  shall  be.  In  this 
regard,  by  the  use  of  its  rightful  authority,  it  can  exercise  a vast 
influence  over  the  commercial  health  of  the  people — an  influence 
which  -a  ill  be  salutary  or  otherwise  according  to  the  measure  of 
its  wi  i • ' ' a or  folly.  When  the  Constitution,  for  the  good  of  all, 
gave  to  * ogress  the  sole  right  “to  coin  money  and  regulate  the 
value  thei-t  of,”  it  made  adequate  provision  for  a measure  of  value 
and  medium  of  exchange,  the  best  the  world  has  yet  seen,  one 
better  fitted  than  any  other  to  act  as  a preventive  of  financial 


94 


M 

sickness,  and  as  a palliative  and  remedial  agent  when  disease  is 
already  present — one  which  cannot  be  increased  suddenly  and 
indefinitely  at  the  call  of  schemers  and  inflationists — one  qualified 
to  resist  at  every  step  wild  speculation  aud  unhealthy  prices,  and 
to  embarrass  those  inclined  to  use  their  personal  credit  for  ille- 
gitimate purposes — purposes  hostile  to  our  industrial,  commercial 
and  monetary  systems.  Though  not  capable  of  suppressing  wholly 
the  visionary  in  human  nature,  or  of  controlling  the  tendency  to 
epidemic  excitements,  metallic  money  always  exerts  a sanitive 
influence.  It  checks  the  break-neck  speed  of  those  who  would 
overturn  themselves  and  the  world  in  their  haste  to  gain  un- 
earned riches;  while  paper  money  of  whatever  pattern  has  the 
effect  of  an  immoderate  stimulus  and  inebriant,  giving  “ aid  and 
comfort  ” to  the  perspiring  throng  of  moon-struck  adventurers, 
and  urging  on  to  a disastrous  end  the  morbid  actions.  Not  only 
is  a specie  circulation  competent  to  moderate  the  fever  and  de- 
lirium of  a commercial  epidemic,  but  it  is  able,  by  another  quality, 
to  mitigate  the  frightful  and  distressing  symptoms  which  mark 
the  crisis  or  culmination  of  the  disease.  It  is  comparatively  in- 
flexible in  one  contingency,  and  flexible  in  another,  both  at  the 
right  time  and  in  due  degree,  as  heretofore  explained. 

I ■ • . 


